By  on March 25, 2005

PARIS — Slammed by unfavorable currency exchange, net profits at Hermès International slid 3.1 percent last year to 210.1 million euros, or $261.25 million. Euros have been converted at average exchange for the year.

The net would have risen 15.6 percent at constant exchange rates. Still, higher advertising spending, investments in new stores, a bigger tax bite and an exceptional depreciation charge for its minority investment in troubled camera firm Leica also dampened the profit picture.

Hermès said in a statement that Leica accounted for about 10 million of 58 million euros, or $12.4 million of $72.1 million, in amortization charges last year.

Operating profits in the second half fell 6 percent to 188.6 million euros, or $234.5 million, with the net down 13 percent to 115.3 million euros, or $143.4 million.

Mireille Maury, managing director of finance and administration at Hermès, said currency factors shaved about 65 million euros, or $80.8 million, off the bottom line last year. Still, she said trading conditions in the first months of the year kept the pace of holiday selling — at least in its own store network.

“The news remains good, particularly in America and Asia,” she said. “We are confident for the year 2005.”

Antoine Belge, luxury analyst at HSBC in Paris, called the numbers “satisfactory” and said the firm should suffer less from currency impact in 2005 because of better hedging and price increases.

Belge also smiled on the disclosure that Guillaume de Seynes, the nephew of chairman Jean-Louis Dumas and managing director for product development and design, has joined the executive committee. “This confirms our view that there is no speculative interest in the company,” Belge wrote in a research note.

For the full year 2004, operating profits inched up 1.2 percent to 336.7 million euros, or $418.7 million, largely in line with consensus expectations. At constant exchange, the increase stood at 20.2 percent.

Maury said Hermès has budgeted 130 million euros, or $161.6 million, for capital expenditures this year, mostly to build five stores and renovate or expand 10 others. Key projects include a 6,500-square-foot Maison Hermès building slated to bow in Seoul this year, and second stores for Beijing and Bangkok.

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