Hermes surprises with strength of first half profits

French luxury fashion group Hermes, known for its silk scarves and exclusive handbags, said on Friday that strong demand helped drive up its profits by 13.9 percent in the first half. The price of shares in the company surged by nearly 3.0 percent. For the first six months of the year, the Paris-based fashion house reported a net profit of 381.7 million euros ($506.9 million) from 335 million euros a year ago -- beating analyst expectations of a profit jump of about 12 percent. The company, known in particular for its Kelly and Birkin bags, also recorded an operating profit of 584.1 million euros, up 14.3 percent on the year, as well as an operating margin of 33.1 percent. Sales, which had been published in July, shot up 11 percent to 1.76 billion euros. "Demand for Hermes products remains strong, impelled by great creativity. The expansion of the growth relays bore fruit," it said, but noted the "advancement of bag sales remains constrained by production capacity." In its outlook for the future, Hermes said that based on the six-month sales figure, the "consolidated sales figure at constant rates could slightly exceed the mid-term growth target of 10 percent". It added that unless it were negatively affected by currency fluctuations "recurring operating margin could be close to the all-time high reached in 2012" which came to 32.1 percent. The traditional French brand said its business in the Americas demonstrated an "excellent" first half, while France and Europe "posted remarkable performances in a difficult economic environment". The market in Japan returned to "sound growth", it said, and the Chinese market was showing "great vitality". This contrasted with remarks in results from some luxury products companies expressing concern at signs of a slowing of the growth of the Chinese market. Shares in the group, which at the end of June had about 10,600 employees worldwide, rose by 2.7 percent to 255.25 euros in morning trading on the Paris stock exchange.