By  on June 1, 1994

PARIS -- While Hermes International had a stellar year last year, posting strong double-digit growth for sales and profits, perfumes remained a weak spot.

Hermes's perfume division, Comptoir Nouveau de la Parfumerie, widened its loss in 1993 to $4.9 million (27.5 million francs) last year. In 1992, the perfume operation posted a loss of 1.4 million francs.

Sales for Hermes perfumes dropped 11 percent in 1993, to roughly $38.1 million (213.8 million francs).

Details of Hermes's 1993 performance were presented Tuesday at the company's first annual meeting here by chairman Jean-Louis Dumas. As the company earlier reported, overall net profit for Hermes rose 19 percent last year to $37.4 million (210 million francs), and consolidated sales rose 16 percent to $507.3 million (2.85 billion francs). Double-digit growth was achieved in all of the company's markets. Sales in the U.S., which account for 11 percent of total, rose 15 percent last year.

The company's sales for the first quarter of this year were up 32 percent, to $135.1 million (759 million francs) from the year-earlier period.

Dumas attributed the poor performance in perfumes to heightened competition in the international marketplace. He also said Hermes's own distribution into certain markets was limited. As a result, Hermes signed an agreement last year with Clarins group in Paris to distribute the fragrances in Italy and Switzerland. This accord is similar to the one Hermes already has with Shiseido for the Japanese market.

As with some of the other Hermes products, perfume sales were strongest in the firm's wholly owned stores. Volume was soft outside that network in part because of a lack of advertising and marketing effort, Dumas said.

"Product launches at other companies helped them compensate for the drop-off of sales for their existing perfumes," he said, adding that Hermes had no launch last year but is preparing one for the end of this year.

While the market launch for a women's fragrance is still on schedule for the fourth quarter, the press presentation, which had been tentatively scheduled for June, has been pushed back to early September.

"We just thought June was too early," said Marie-Jeanne Chevallereau, chairman of the perfume arm, explaining that the perfumes would not yet have gone on sale then. "Also, there are a lot of magazines and newspapers that have big back-to-school editions showing all the new products, and we don't want to be mixed with all that."Among the various perfumes in Hermes's stable, Caleche's 1991 relaunch -- named Soiede Parfum Caleche -- remains a bestseller, with constantly increasing sales. Last year's line extension of Amazone in the form of an eau de fraicheur has also been well received. Another new product, the waterproof leather-covered perfume atomizer, has become a popular accessory.

Another small but growing sector at Hermes is its men's and women's ready-to-wear. Sales grew 25 percent last year to $60.9 million (342.1 million francs). Women's wear, under the direction of Claude Brouet, grew 27 percent, while men's, under Veronique Nichanian, grew 20 percent.

Dumas said this growth was partly a result of enlarging the sales space in Hermes stores devoted to apparel, and to properly merchandising the goods.

The rtw forms what Dumas dubbed a "troika" alongside leather goods and silk scarves. The latter two combined represented 41.5 percent of consolidated sales, while rtw accounted for 12 percent.

Dumas emphasized that increasing rtw's contribution to overall sales is part of the group's strategy.

Silk scarves posted the highest growth rate of any Hermes product. Sales jumped 33 percent last year to roughly $109.1 million (612.9 million francs). Hermes increased capacity in its scarf plants near Lyon, France, and can now produce up to 793,000 scarves annually.

Sales for ties rose 11 percent, to about $50.8 million (285.1 million francs), while leather goods sales rose 28 percent, to $101.5 million (570.2 million francs).

Expansion plans this year for the firm include opening two wholly owned retail locations, one in Rome and one within Mitsukoshi in Tokyo. Seven concessions, which are basically franchised stores, are planned this year for Palermo, Capri, Padua and Venice, Italy; Toulouse, France; Copenhagen, Demark, and Crans-sur-Sierre, Switzerland. Wholly owned stores in London, Brussels, Deauville and Houston will be renovated.

Last year, Hermes counted 248 points of sales worldwide, excluding airport, duty-free and airline sales. Of those, 59 were wholly-owned freestanding stores, and 63 were concessions. The remainder is made up of store corners, shop-in-shops and some multi-brand concessions.

Retail sales of Hermes last year rose 22 percent, to $267 million (1.5 billion francs), due in part to openings of four wholly owned stores and eight concessions. Same-store sales rose 13.5 percent.

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