Paris—Hermès International SCA said today its 2013 profit margin hit an record high but the luxurygoods house expects this year’s profit will be hurt by a weakened Japanese yen.
Net profit increased 6.8% last year to 790 million euros (about $1.1 billion). Last month, Hermès reported its full year sales jumped 7.8% to 3.75 billion euros.
Decline in Profitability?
Hermès boasts one of the highest operating margins of any in luxurygoods and 2013 set a new standard: operating profit rose 8.9% to 1.218 billion euros while its operating margin grew to an all-time high, 32.4% of sales (compared to 32.1% in 2012).
While a slowdown in luxurygoods sales in China—and economic troubles in Europe—has hurt sales for Kering and LVMH, Hermès has proven resistant. Full year sales rose 16% in Asian markets excluding Japan, 14% in the Americas and 12% in Europe.
As for 2014 results, CEO Axel Dumas said: “We’re hoping for good results but there will be more convulsions. We accept there will be a decline in profitability in 2014, especially because of the decline of the Japanese yen.”
While Hermès has raised prices 10% in Japan (about 4% in Europe and between 6% and 7% in the North America) earlier this year, Hermès still has to take into account the increased cost of selling products in Japan, where a consumption tax is also due to rise next month. Not to mention, the yen was declined about 13% against the euro in the last year.
Hermès estimates its operating profit as a percentage of sales will fall to more than 27% in 2014, Dumas said.
“We are very confident, yet prudent,” he added.