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UPDATE 2-Hermes says year starts well, margins hit record

Published 03/04/2011, 07:58 AM

(Corrects to reinstate dropped words "The group" at start of 13th paragraph)

* Hermes 2010 EBIT 668 million eur vs 463 million yr ago

* Proposes 2010 dividend of 1.50 eur/shr

* Says does not plan to have any contact with LVMH

* Shares rise 1.3 percent

(Adds comments fom CEO, details, share price)

By Astrid Wendlandt

PARIS, March 4 (Reuters) - Hermes said the year had started very well after publishing its highest operating margin ever since its 1993 stock market listing, boosted by tourist shoppers in Europe and buoyant sales in Asia.

Patrick Thomas, Chief Executive of the maker of 10,000-euro leather handbags and silk scarves, said he expected 2011 to be another good year but with less speculator growth as in 2010, which saw a strong rebound after the 2009 slump.

"It (current trading) is going very well but it is difficult to bounce back (again) after such an exceptional year," Thomas said.

He said he also expected sales growth this year of about 2 to 3 percent in Japan, Hermes' biggest market, boosted by the company's investments and concessions it repurchased.

Thomas said Hermes still had not had any contact with its arch-rival and biggest shareholder LVMH which built up a 20.2 percent stake.

"It is a shareholder which is more than dormant and we do not plan to have any contact with it," Thomas said.

LVMH's pounce on Hermes shares in the market reduced its floating stock to just about 7 percent of the group's equity, but Thomas said the group was not thinking about de-listing for now even though in theory the project could make sense.

"It is absolutely not on the agenda," Thomas said.

SALES GROWTH

Thomas said the group was not planning to raise prices significantly to pass on the recent jump in the cost of raw materials such as leather.

"We want to make sure that a Hermes object remains accessible in the long term," Thomas said, adding that on average prices had only risen by 2 percent in 2010.

Looking forward, Thomas confirmed Hermes's expectations of sales growth between 8 and 10 percent this year at constant currencies.

Thomas, 63, and who was the first non-family member to take the executive reins of Hermes in 2004, said he planned to pass on the baton "within the next two to three years" but declined to give more detail.

The group said its operating margin rose 3.6 percentage points to 27.8 percent, one of the highest in the European luxury industry.

Operating profit rose 44 percent to 668 million euros ($931.7 million) from 463 million in 2009, while net profit rose 46 percent to 422 million euros.

The results come two days before the group is due to present the first womenswear collection created by Christophe Lemaire, the former Lacoste creative designer who replaced Jean-Paul Gaultier last year.

The show will take place in Hermes' new store which has a strong emphasis on homewares on Paris's left bank.

Hermes shares were up 1.3 percent at 153.35 euros by 1021 GMT. (Additional reporting by James Regan, Editing by Hans Peters and David Holmes) ($1=.7170 Euro)

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