Parisian fashion house Hermés SA Friday disclosed strong 2008 revenue gains propelled by sales of its signature Kelly and Birkin handbags, underscoring how leather goods are faring better than so-called hard luxury items such as jewelry and watches amid the downturn.
Hermés, which is famous for its handbags and silk ties, said sales last year rose 8.6% to 1.76 billion ($2.3 billion). The fashion house did not break out profits for the year but said that it expected sales this year to be at least flat with 2008, excluding currency effects.
Sales in the group's leather-goods division, which includes handbags and other small leather items, rose 13% to 763.1 million last year, while sales in the company's watch business slumped 9.7% to 94.5 million. Hermés attributed the fall in watch sales to a steep decline in demand in Japan.
Analysts said the sales decline is symptomatic of the hard luxury industry as a whole. "So far leather goods are outperforming watches and jewelry," said Erwan Rambourg, a luxury-goods analyst at HSBC. "The watch industry in particular has gone from hyper growth to negative growth. It has been very quick and very brutal."
The run up to Christmas was not kind to watch and jewelry makers. Italian jeweler Bulgari SpA recorded a 10% decline in fourth-quarter sales. Swiss watch-maker Swatch Group AG, whose brands include Swatch and Omega, saw sales dip 6% in the second half of 2008 versus a year-ago. The Federation of Swiss watch makers last month said Swiss watch exports fell 12% in November from October to 1.5 billion Swiss francs ($1.28 billion).
Unlike major leather-goods labels, such as Hermés and Louis Vuitton, most watches and jewelry brands are sold through independent retailers. These shop owners have slashed orders for watches.
Another aspect weighs heavy on the industry: the guilt factor. In a slump, customers are more likely to buy a bag than a diamond ring.
"A bag is a much easier purchase to justify because it is cheaper," said Françoise Paumard, a luxury-goods analyst at Exane BNP Paribas. For 5,000 a customer can buy a top-of-the-range bag, while at that same price they will get a middle-range watch, Ms. Paumard said.
Hermés, which is famous for its handbags and silk ties, said sales last year rose 8.6% to 1.76 billion ($2.3 billion). The fashion house did not break out profits for the year but said that it expected sales this year to be at least flat with 2008, excluding currency effects.
Sales in the group's leather-goods division, which includes handbags and other small leather items, rose 13% to 763.1 million last year, while sales in the company's watch business slumped 9.7% to 94.5 million. Hermés attributed the fall in watch sales to a steep decline in demand in Japan.
Analysts said the sales decline is symptomatic of the hard luxury industry as a whole. "So far leather goods are outperforming watches and jewelry," said Erwan Rambourg, a luxury-goods analyst at HSBC. "The watch industry in particular has gone from hyper growth to negative growth. It has been very quick and very brutal."
The run up to Christmas was not kind to watch and jewelry makers. Italian jeweler Bulgari SpA recorded a 10% decline in fourth-quarter sales. Swiss watch-maker Swatch Group AG, whose brands include Swatch and Omega, saw sales dip 6% in the second half of 2008 versus a year-ago. The Federation of Swiss watch makers last month said Swiss watch exports fell 12% in November from October to 1.5 billion Swiss francs ($1.28 billion).
Unlike major leather-goods labels, such as Hermés and Louis Vuitton, most watches and jewelry brands are sold through independent retailers. These shop owners have slashed orders for watches.
Another aspect weighs heavy on the industry: the guilt factor. In a slump, customers are more likely to buy a bag than a diamond ring.
"A bag is a much easier purchase to justify because it is cheaper," said Françoise Paumard, a luxury-goods analyst at Exane BNP Paribas. For 5,000 a customer can buy a top-of-the-range bag, while at that same price they will get a middle-range watch, Ms. Paumard said.
