UPDATE 3-Hermes shines with best Q1 sales of luxury sector

* Q1 sales 508 million euros, up 18.5 percent

* Says Q1 sales cannot be extrapolated to the full year

* Shares rise more than 3.5 percent

(Adds CEO comments, updates share price)

By Astrid Wendlandt

PARIS, May 6 (BestGrowthStock) – Hermes posted the biggest surge in
first-quarter sales of all European luxury goods companies on
Thursday, pointing to a continued polarisation of the market in
which well-established brands crush weaker rivals.

The maker of 15,000-euro ($20,100) crocodile handbags and
silk scarves confirmed the nascent rebound in the luxury goods
market, particularly in the United States where sales rose 25
percent at constant currencies during the first quarter.

In Europe — a market highly dependent on tourists — Hermes
revenue rose 15 percent, while in Asia, exluding Japan, it was
up 47 percent.

Overall, Hermes sales in the three months to March 31 rose
18.5 percent to 507.7 million euros, or 20.2 percent at constant
currencies.

By comparison, like-for-like sales from fashion and leather
goods at luxury giant LVMH rose 10 percent in the first quarter,
while at Gucci Group they were 6.1 percent higher. During
Burberry’s first-half, they rose 6 percent.

But looking ahead, Hermes Chief Executive Patrick Thomas
said he expected the company’s growth rate to slow down during
the year, due to in part to an increasingly unfavourable
comparative basis.

“Towards the end of the year, we should see a slower growth
rate than during the beginning of the year,” Thomas told Reuters
in an interview.

Thomas added that the company was “not very optimistic about
2010” but confirmed its sales growth target of at least 5
percent and expectations of a slight increase in operating
margin.

He said that one of Hermes’s biggest markets, Japan, where
sales fell 2 percent in the first quarter, would finish the year
with a slight increase.

Responding to speculation earlier this week that family
shareholders might sell some shares after ex-chairman and
shareholder Jean-Louis Dumas passed away, Thomas said they still
planned to hold on to their stakes.

Several brokers, including Vontobel, Credit Suisse and HSBC,
said Hermes’s full-year sales target looked too conservative and
planned to lift their 2010 forecasts.

Vontobel said it would increase its current-year sales
growth forecast to 10 percent from around 8 percent at constant
currencies.

“Despite the strong improvement in Q1, we were quite
surprised not to see an upgrade of the FY10 guidance but
according to management, the environment continues to be
uncertain,” HSBC said in a note.

Hermes shares were up 3.55 percent at 102.70 euros at 1054
GMT.

Penny Stocks

(Editing by James Regan and Andrew Callus)
($1=.7709 Euro)

UPDATE 3-Hermes shines with best Q1 sales of luxury sector