Hermes reports hit to first-quarter sales from Iran war

French luxury group HermesHRMS.PA reported weaker than expected first-quarter sales on Wednesday as the Iran war hit spending in the Middle East region as well as in France, with fewer tourists visiting Paris and buying expensive handbags and designer clothes.

Sales of products including Birkin and Kelly bags, silk scarves and perfume grew by 6% in currency-adjusted terms, lower than a Visible Alpha analyst consensus of 7.1% growth. Currency fluctuations took 290 million euros off Hermes' revenue, leading to a 1% drop in reported sales to 4.07 billion euros ($4.80 billion), from 4.13 billion euros a year ago.

Hermes, which caters to the ultra-wealthy with handbags starting at $13,000, said weaker tourist flows due to the conflict had hit sales in concession stores at airports and in the Middle East, as well as in the UK, Italy and Switzerland where Gulf shoppers are a key driver.

Sales in the Middle East region fell 6% in currency-adjusted terms, to 160 million euros, from 185 million euros in the first quarter last year. Though only accounting for 4.4% of sales, the Middle East was the fastest-growing region for Hermes last year.

"The Middle East, down by 6% was of course significantly impacted by the geopolitical events affecting the region in March," said Hermes chief financial officer Eric du Halgouet.

Sales in the United Arab Emirates' luxury malls were down by 40% in March, du Halgouet said.

($1 = 0.8482 euros)

-Helen Reid/Reuters