Hermès Issues Special Dividend as 2011 Profit Spikes

Handbags and accessories were stellar performers at Hermès last year

Paris—Shareholders of Hermès International S.C.A. got a double dose of good news last week. The Paris luxurygoods house announced a special dividend on the heels of a company’s 2011 earnings report that included a 41% jump in its profit.

The proposed special dividend of 5 euros a share is in addition to a regular dividend of 2 euros a share.

According to Patrick Thomas, ceo, the dividend would remain an exceptional item and that investors should not expect a similar one next year.

For 2011, total net income increased to 594.3 million euros from 421.7 million euros. (about $787.1 million). The latest results included a 29.5 million euros gain from the sale of the company’s stake in the Jean-Paul Gaultier Group. Net income has now doubled from 288.8 million euros reported in 2009.

Operating income for the year surged 32.5% to 885.2 million euros (about $1.2 billion). Operating margin improved 3.4 points to 31.2%.

Strong Sales Across All Regions, Categories

The company said it benefited from double digit increases in its retail and wholesale businesses. Total sales revenue increased 18.3% to 2.84 billion euros. The company’s own stores saw a 19% growth in sales while wholesale sales rose 15%.

The Americas and Greater Asia lead the sales increases. The Americas were up 26% and Asia, except Japan, was up 29% where the company opened six new stores. In Mumbai, Hermès opened the first luxury store outside shopping center in the city’s historic center.

In Japan, sales were almost stable across the year, down about 1%, despite the earthquake and tsunami disaster in March 2011.

In Europe, sales increased by 16% thanks to momentum in all countries. In France, the new store on rue de Sèvres, which was opened in late 2010, was a success. The company added two concessions in Moscow, as well as opened new branches in Berlin, Rome, Barcelona and Istanbul. Finally, a new store on quai du Rhône in Geneva was opened to replace the existing branch.

Hermès will open three stores and renovate 12 others this year as part of its longterm strategy of expanding its own network, Thomas said. A “maison” flagship store will open in Shanghai at the end of 2013, the company said.

By category, the company’s silk and textiles business grew 23% sales growth, helped in part by the success of new collections.

“Boosted by small leathergoods and leather bags, for which demand continues to outstrip supply,” its leatherwork and saddlery division posted a 12% increase.

Its ready-to-wear and fashion accessories division reported a 30% increase boosted by the success of new ready-to-wear collections and accessories offerings. “The first women ready-to-wear collection designed by Christophe Lemaire was warmly greeted by customers,” the company added.

Perfume business rose 15% on the successful launch of Un Jarin sur le Toit. Watches were up 23%, jewelry up 27% and tableware up 17%.

Patrick Thomas to Remain on as CEO

Asked about the brand’s continued success, Thomas told reporters: “We make beautiful objects–I say this with pride, particularly for the skilled workpeople who make them. It is the only real explanation for the success.”

French newspapers also reported that Thomas, who turns 65 in June, will remain as ceo until at least 2013.

“Regarding my replacement, nothing will happen before a year and a half, that’s to say before the end of 2013,” Thomas told Les Echos.

Thomas has been highly visible chief executives especially in the wake of LVMH’s announcement that it had taken more than a 20% stake in Hermès.

Hermès, whose majority shareholders are members of the founding company, launched a defense against any takeover from LVMH. Meanwhile, LVMH raised its stake further to 22.3% but maintains it is only interested in a friendly investment with Hermès.

Family members, who hold 50.2% of the company’s share set up a holding company to defend against any takeover attempt. Thomas reportedly put his plans to retire on hold due to LVMH’s stake.

 

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