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Hermès Taps Co-CEO as Net Surges

Hermès reported a 12.4 percent rise in first-half profits, though its new co-chief executive, Patrick Thomas, warned the second half may be tougher.

PARIS — In another sign of an ebullient luxury sector, Hermès International said first-half net profits rose 12.4 percent to 94.8 million euros, or $115.9 million at average exchange rates, boosted by strong demand for its high-margin leather goods and silk scarves.

But Patrick Thomas, who was named co-chief executive of Hermès on Thursday, sounded a cautionary note for the balance of the year, when the French luxury group will come up against more difficult comps.

“We’re still growing, but not booming,” Thomas said in an interview. “We are dealing now with a single-digit growth pattern.”

Asked about July and August sales results, he responded: “The trend remains very good. But the whole year 2004 will not be as good as the first half.”

Unfavorable currency levels shaved about 30 million euros, or $36.6 million, from operating profits, which totaled 148.1 million euros, or $180.7 million, a 12.6 percent gain. At constant exchange, net profits rose 36.6 percent. Net margins stood at 15.3 percent, unchanged from a year ago.

Sales in the six months ended June 20 rose 13 percent to 620.5 million euros, or $757.1 million, as reported. Bags and luggage led the gains at 24 percent at constant exchange, aided by increased production capacity.

Like most luxury firms, Hermès found it easier to shine in the first half of 2004, as sales last year were dented by the SARS scare and the Iraq war, which put a damper on tourism and consumer sentiment. But Hermès also had a “sharp upturn” in business in the second half of 2003, thus the expectation of “moderately slower” growth ahead.

Still, ready-to-wear could be a bright spot. The first women’s collection designed by Jean Paul Gaultier has been delivered to stores and “the early signs are good,” Thomas noted. “We are very pleased with the first signs and numbers.”

Sales of rtw in the first half increased 8 percent.

Thomas, who rejoined Hermès last year as group managing director, downplayed the significance of his new title, citing no major change in his working rapport with Hermès executive chairman and ceo Jean-Louis Dumas.

“It is not a succession plan,” Thomas stressed. “[Dumas] wants me as the co-ceo simply because the group is growing.”

He said they would continue to share many duties, with Dumas devoting more time to artistic direction and strategic issues and Thomas taking the lead in day-to-day operations.

Meanwhile, Hermès said it would continue to expand its retail network with the addition of three stores this year and renovating and enlarging another 10 locations.

In the first half, investments in stores and production capacity totaled 59 million euros, or $72 million.

The company also confirmed it would increase its communication spending by 40 percent in support of new products.

Shares of Hermès International eased 0.8 percent to close at 160.70 euros, or $195.70 at the current exchange rate, on the Paris Bourse.