France s Hermes to open new branches in Ningbo & Nagoya Mitsukoshi

It was a day of mixed fortunes for luxury retailers on Thursday, with different brands taking very different turns. One analyst said the moves typified of the growing divergence in the sector.

Frances Hermes - maker of the iconic Kelly and Birkin leather handbags - posted a solid set of numbers Thursday morning whilst hiking its divided. Its 2013 earnings release reported an operating income which had climbed 8.9 percent from the year before. It also saw resilience in Asian sales, highlighting a 16 percent rise in sales in the region (excluding Japan).

This comes as many high-end retailers have been burnt in China, with new rules cracking down on corruption and the receiving of gifts within the public sector. Hermes also announced that it was continuing to expand its distribution network with the launch of two new branches in Ningbo, China, and Nagoya Mitsukoshi, Japan.

Equity analysts Thierry Cota and Vishnu Reddy at Societe Generale said the earnings came in "close to estimates." And despite "impressive fundamentals" the two analysts still reiterated their sell rating, claiming that it was trading at a premium compared with the wider sector. Shares fell nearly 1 percent on Thursday, broadly in line with the wider market.

Meanwhile, across the English Channel a very different story is playing out for fellow luxury bag maker Mulberry. The U.K. firm announced Thursday that CEO Bruno Guillon will step down with immediate effect.

This comes after two years for Guillon at Mulberry - the maker Bayswater and Alexa handbags - after joining the Somerset firm from Hermes in 2012. Although no reason was given for his departure, a profit warning in February - with shares plunging 26 percent - might have been fresh in the mind when the decision was made.

Like recent trends in the U.K. supermarket sector, Rahul Sharma, founder and managing director of investment group Neev Capital, sees a squeezed middle ground where brands like Mulberry are losing out.

In a market that has slowed a little, he said, Sharma believes that Guillon had joined Mulberry with the expectation of pushing it into the high-end leather goods sector with the big players of Hermes, Dior and Chanel.

And with an increase in price and a focus on a more "upper-middle England" brand this simply didnt play out as expected, Sharma added.

"It really depends on whether your product is up to scratch or not," he told CNBC via telephone. "(Mulberry) were doing the same thing as everybody else." Going forward, he predicts the high-end brands to continue to do well despite tough conditions and can see some upside for more affordable brands like Tory Burch and Michael Kors.

LINK:	http://en.nbwh.gov.cn/art/2014/3/25/art_1325_51611.html...
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