Hermès First Half Profit Up 14.9%, Beating Forecasts

Hermes Handbag and accessoriesParis—Bolstered by sales increases of its luxurygoods across the world, Hermès International today reported its first half profit was up 13.9%.

For the first six months of the year, Hermès posted a net profit of profit of 381.7 million euros (about $506.9 million) surpassing analysts’ estimate for a 12% increase. First half sales, which have been released in July, were up 11% to 1.76 billion euros.

Operating profit reached 584.1 million euros, up 14.3% on the year, as well as an operating margin of 33.1%.

“Demand for Hermès products remains strong, impelled by great creativity. The expansion of the growth relays bore fruit,” the company said, but noted the “advancement of bag sales remains constrained by production capacity.”

Sales were strong across all regions, with Asia (excluding Japan) posting a 17% increase.

“The Chinese market continued to display great vitality,” Hermès said, contrasting comments from some of its rivals that China was amid a slowdown.

France, where sales were up 13% and the rest of Europe, which had a 14% increase, “posted remarkable performances in a difficult economic environment.”

Operating Margin Close to ‘All-Time High’

“The Americas (+17%) had an excellent half-year.”

By product category, Leatherwork & Saddlery posted a 10% increase. To help with production, Hermès is continuing its investments with the expansion of two factories opened in 2012 in Isère and Charente, and two new facilities devoted to artisanal activities in the Franche-Comté region.

Ready-to-wear and fashion accessories—“flush with the success of the latest ready-to-wear collections and fashion accessories registered strong growth” with sales up 21%.

The Silk and Textiles sector posted a 13% increase and perfumes continued to show growth, up 20%.

Watches were down 1% “affected by the general downturn in the watch industry and the high basis for comparison of the previous year.”

Other sectors including jewelry and Art of Living, continued to show their great potential for expansion (up 40 %), the company said.

As for the future, Hermès said that based upon first half sales, the “consolidated sales figure at constant rates could slightly exceed the mid-term growth target of 10%.” And that unless it were negatively affected by currency fluctuations “recurring operating margin could be close to the all-time high reached in 2012″ which amounted to 32.1%.

 

 

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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com