Hermès Reports Record 2012 Sales

In What's New, Industry News by Jeff Prine

"Absolute luxury" Hermes style

“Absolute luxury” Hermes style

Paris—The view isn’t only better from the top, business is too. At least that’s the take home from Hermès International SCA which on Tuesday reported record-breaking sales for 2012.

The French luxurygoods house known for its Birkin handbags and silk scarves, posted a 22.6% sales increase to 3.48 billion euros (about $4.66 billion). Excluding currency fluctuations, sales rose 16%. Hermès easily met its expectation of organic sales growth exceeding 13%, as the company posted full year revenue growth, excluding currency variations, of 16.4%. That marks the sixth year the Maison has met or exceeded its own annual sales target.

For 2012, “given the excellent performance in the fourth quarter, the operating margin is expected to be slightly above the all-time high achieved in 2011,” the company said.

By region, Asia (excluding Japan) drove sales with a 25% increase thanks to new stores and expansions. Sales in Europe rose 15% and sales in the Americas rose 14%.

By category, silk and textiles posted 16% sales increase, while ready-to-wear and fashion accessories surged 22%. Leathergoods sales rose 12% helped along by the addition of two new workshops in France due to “persistently strong demand.”

Watches had a 17% sales increase as the Maison gained more haute horlogerie customers with new styles. Other divisions posted a 45% gain, including jewelry driven by the success of the brand’s second Haute Bijouterie collection.

‘Absolute Luxury’

The company’s fourth quarter sales were also stellar, rising 23% to 1.04 billion euros—better than the 995.8 million euros analysts had predicted.

While other luxurygoods brands have been reporting a slowdown in the rate of their sales increases, Hermès continues to set records. Much of that is due to the Maison’s ultra high-end positioning and careful handling of its inventory, analysts say.

“Hermès ends the year on a perfect note,” said Thomas Mesmin, analyst at CA Cheuvreux. The expected profitability for the year is “remarkable,” he said.

Hermes exerts more control over sales by limiting the supply of its handbags amid strong demand, according to Luca Solca, analyst at Exane BNP Paribas.

“Hermès’ marketing strategy is to be unique and highly exclusive, so that it maintains exclusivity and low supply,” said Milton Pedraza, chief executive of the Luxury Institute. “The brand banks on the fact that its products are not readily available and are not worn by everyone. Hermès is the anti-ubiquity brand and it does it extraordinarily well.”

Bain & Co. had predicted that the so-called “absolute luxury” level where Hermès is positioned will be the fastest-growing segment of the luxury market and will outperform the rest until at least 2014.




NYFW Breaking Trends Fall 2013: Fur Accessories
Costs Hits Jones Group Q4 Profit, But Sales Rise