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French luxury groups Hermes, Remy Cointreau report setbacks

Two French luxury product groups, Hermes which makes high-class fashion accessories and spirits group Remy Cointreau, reported sales setbacks on Friday, in part because of slowing sales in China.

PARIS: Two French luxury product groups, Hermes which makes high-class fashion accessories and spirits group Remy Cointreau, reported sales setbacks on Friday, in part because of slowing sales in China.

France is home to several leading luxury products groups which make a big contribution to the French export effort, but several of them have suffered from a corruption clampdown in China on ostentatious business entertainment and gift-giving.

Hermes, known particularly for silk scarves and handbags, reported that sales slowed down in the second quarter of the year.

Overall, sales for the first half rose by 7.9 per cent from the equivalent figure last year, but French stock brokers Aurel BGC commented that Hermes has been in the habit of turning in sales growth of 10.0 per cent or more.

Shares in Hermes were showing a fall of 1.77 per cent to 263 euros in early trading.

The overall French market as measured by the CAC 40 index was down 0.07 per cent.

In the second quarter, sales rose by 5.8 per cent to 963.4 million euros ($1.3 billion), or by 9.6 per cent excluding the effect of changes in currency values.

This was a sharp slowdown from performance in the first quarter of the year when sales rose 14.7 per cent at constant exchange rates. In the first quarter of last year, sales rose by 16.0 per cent.

The figures also fell slightly short of what analysts had expected.

Aurel BGC commented that the main leatherware, clothing and accessories divisions had raised sales by 10.0 per cent or more but that sales of watches had slumped by 12.0 per cent in the second quarter, mainly because of a slowing of sales in China.

Remy Cointreau, which makes spirits and depends for about half its business on Remy Martin Cognac, reported that in the first quarter of its financial year, sales slumped by 18.5 per cent to 214.8 million euros.

It blamed unfavourable exchange rates, and the ending of a distribution contract in the United States, but also noted it was continuing to reduce its stocks of products in Asia "consistent with the consumption trends in this market".

Sales of Remy Martin plunged by 15.3 per cent owing largely to the de-stocking in Asia and to difficult and competitive conditions in western Europe.

But the Cointreau brand did well in the United States and performed strongly in Asia, notably in Japan, and in eastern and central Europe.

The price of shares in the group rose by 4.17 per cent to 65.21 euros.

Brokers Gilbert Dupont said that the overall sales performance was better than expected, and Aurel BGC said that "at last" the fall in sales of cognac was slowing down.

The group said that this year it expected sales and operating profit to rise.

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