WWD.com/business-news/financial/hermes-reports-7-3-profit-gain-460717/
government-trade
government-trade

Herm?s Reports 7.3% Profit Gain

Aided by disposals and accelerating sales in the second half of 2007, full-year net profits at Hermes International rose 7.3 percent to 288 million euros,...

PARIS — Aided by disposals and accelerating sales in the second half of 2007, full-year net profits at Hermès International rose 7.3 percent to 288 million euros, or $394.8 million, from 268.4 million euros, or $337.2 million, a year ago.

“We had very good results from our growth engines: silk, men’s ready-to-wear, fashion accessories and jewelry. This did boost the figures,” said Patrick Thomas, chief executive officer at Hermès. “We are very pleased.”

The results were “slightly better” than Hermès’ projections and bested analysts’ expectations.

Still, unfavorable exchange rates chopped 80 million euros, or $109.7 million, off full-year sales tallies, and wiped 44 million euros, or $60.3 million, from operating results. (Dollar figures are converted from euros at average exchange rates for the respective periods.)

Operating profits in 2007 improved 2.1 percent to 423.7 million euros, or $580.8 million, from 415.2 million euros, or $521.6 million, as sales increased 7.3 percent to 1.63 billion euros, or $2.38 billion. At constant exchange rates, the bump in operating profits stood at 14.5 percent.

The figures include an exceptional gain of 9.2 million euros, or $12.6 million, from the disposal of bonds in Leica Camera AG. The net margin remained steady at 17.7 percent of sales.

Given mounting economic woes in the U.S., Thomas said forecasting is becoming increasingly difficult. Hermès has set a sales growth target of around 10 percent at constant exchange for 2008.

Asked about recent trading, Thomas said, “The beginning of the year was good everywhere, including the U.S.”

However, he cautioned it is “difficult to extrapolate” for the balance of the year given multiple uncertainties in the U.S. and a “challenging market in Japan,” which accounted for 24 percent of Hermès sales last year. The Americas represented 15 percent of sales, France 20 percent, the rest of Europe 21 percent, Asia-Pacific 17 percent and other regions 3 percent.

Thomas said Hermès would continue expanding its production capacity and store network this year, opening 12 new branches. The locations are in San Diego and Santa Fe, N.M., in the United States, four stores in China, two in Macau and one each in Hong Kong, Seoul, Kobe in Japan and Delhi in India. Roughly 30 stores are slated for renovation.

Last year, Hermès said investments in its factories and boutiques totaled 156 million euros, or $213.9 million.