Hermes plans 3-4 new stores per year in China

[ 2008-09-09 ]


SHANGHAI (Reuters) - Paris-based luxury group Hermes plans to open three to four stores in China each year over the next three years, tapping the country's growing ranks of affluent consumers, a senior executive said on Tuesday.

The company, which already operates 12 stores in China, has doubled its sales in the country every year for the last three years although that pace will be hard to maintain in the years ahead as the revenue base has widened, Hermes Executive Vice President Patrick Albaladejo said in an interview.

He declined to give a figure for the company's annual sales in China, but said it was less than $50 million.

The company posted 1.63 billion euros ($2.30 billion) in global sales last year.

"We expect to see very, very solid growth in our existing stores in China," Patrick said. "We're just at the beginning of the potential we'd like to tap."

China had 415,000 millionaires in U.S. dollar terms at the end of 2007, ranking fifth worldwide, according to a report by Merrill Lynch and consultancy Capgemini. The number has been rising as the economy surged at double-digit rates over the last five years.

The market has been targeted by luxury goods makers including Gucci, LVMH (LVMH.PA: Quote, Profile, Research, Stock Buzz) and Italy's Tod's (TOD.MI: Quote, Profile, Research, Stock Buzz).

China has the potential to become one of Hermes' top five global markets in four to five years, Albaladejo said.

Known for its upmarket leather handbags and themed scarves, Hermes has said it will aim for 10 percent organic sales growth worldwide in 2008 and has an operating margin target of 25.5 percent for the year.

"The bulk of our customers is a select group of very rich people whose lifestyle is not influenced by the economic slowdown," Albaladejo said.

In Japan, however, many Hermes customers are middle-class consumers and its business has suffered with the soft economy, he said.

Hermes, also known for its "H"-embossed belts and perfumes such as Bel-Ami and Caleche, sells watches and perfumes through department stores in China.