PARIS — Hermès International said Tuesday it expected to post a record operating margin in 2012 after comfortably beating its target for annual sales growth, thanks to a surge in revenues in the fourth quarter.
The maker of Birkin bags and silk scarves said sales totaled 1.04 billion euros, or $1.35 billion, in the fourth quarter, up 22.5 percent versus 2011. This represented a rise of 18.5 percent at constant exchange rates.
“The Hermès business is in excellent health,” chief executive officer Patrick Thomas told WWD.
“What we do is perfectly in sync with the aspirations of consumers, first in Europe and the United States, now also in China, since more and more Chinese consumers are looking for discretion and quality objects for pleasurable living, rather than the ostentatious luxury that symbolized the early days of luxury,” he added.
Hermès reported revenues for 2012 as a whole rose 22.6 percent to 3.48 billion euros, or $4.48 billion. Stripping out currency fluctuations, sales were up 16.4 percent, exceeding the company’s most recent target of 13 percent consolidated annual sales growth.
The French luxury goods firm is scheduled to report full-year earnings on March 21.
“For the full year, given the excellent performance in the fourth quarter, the operating margin is expected to be slightly above the all-time high achieved in 2011,” it stated, referring to last year’s record operating margin of 31.2 percent.
Hermès plans to pay an interim dividend of 1.50 euros, or $1.98, a share on March 1.
The results came on the heels of figures showing sales at LVMH Moët Hennessy Louis Vuitton rose 12 percent in the fourth quarter, while revenues at Burberry climbed 11.3 percent in the three months to Dec. 31. PPR is due to publish full-year results Friday.
While competitors reported flagging demand in China, Hermès said sales in Greater China rose 34 percent in the fourth quarter and were up 28 percent in 2012 as a whole. China now accounts for 21 percent of its overall revenues, versus 19 percent a year ago.
All geographic regions and sectors contributed to fourth-quarter growth. Revenues in the Asia-Pacific region, excluding Japan, were up 29.7 percent at constant exchange rates, with Japan rising 15.1 percent, Europe gaining 11.6 percent and the Americas up 20.8 percent.
Sales of leather goods and saddlery, which account for almost half the brand’s revenues, were up 14.8 percent at constant exchange rates. Ready-to-wear and fashion accessories posted a 25.5 percent rise, silk and textiles were up 18.9 percent, perfumes rose 19 percent and watches recorded a 20.2 percent increase.
Sales in the “other Hermès sectors” division, which groups jewelry and home wares, were up 32.2 percent, boosted in part by Pierre Hardy’s second fine jewelry collection for the house, which featured precious miniature renditions of the famed Kelly and Birkin bags.
Hermès added two stores to its network in 2012 — in Taiwan and China — and renovated or expanded another six.
In 2013, it plans to open just one new store, in Ningbo, China, and renovate another 11, including Hermès China World in Beijing and the Hermès flagship in Milan, which will be relocated from Via Sant’Andrea to Via Montenapoleone, Thomas said.
Hermès will also open a store in Paris for its Chinese luxury brand, Shang Xia, its first outside of China. Initially scheduled to launch at the end of 2012, the boutique is now expected to open in September.
“The store has been in the works for a year, but since the demand in our stores in China — in Beijing and Shanghai — was stronger than we expected, and the supply chain is far from being completely secure, we preferred to defer the opening a little rather than having a store with too little merchandise,” Thomas said.
Despite all these positive indicators, the executive said Hermès was sticking to its long-term forecast of 10 percent annual sales growth in 2013.
While currency fluctuations have worked in the company’s favor for the last three years, generating a positive impact of 178 million euros, or $228.9 million, on 2012 sales, the trend will likely be reversed this year, he noted.
“The strong euro is not going to help us. Secondly, the economic outlook in France and the rest of Europe is not very bright. So we have to be cautious,” Thomas explained.
Thomas said the euro was “still slightly overvalued,” but added it was difficult to determine an optimal level for the currency, which was trading at $1.32 and at 113.5 Japanese yen on Tuesday.
“A strong European currency is a good thing, as it reflects the strength of the European economy and it means the currency is well managed. I think the European Central Bank is doing what it needs to keep the euro strong. Now it must not become too strong, so there is a balance to be found,” he said.
Shares in Hermès International closed up 1.5 percent at 248.65 euros, or $328.60, on the Paris Stock Exchange.
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews
“Stranger Things” is getting a new cast member for season 2. Meet @sadiesink_, the 15-year-old who will be joining the Netflix series for its new season. You may recognize her from “The Glass Castle” with Brie Larson and Woody Harrelson, but the Texas native’s next role goes in an entirely different direction. She describes her character, Max, as “a rough and tumble skater girl [who] becomes friends with the boys at school.” The second season debuts on October 27. (📷: @jgreenery) #wwdeye
Amid the Harvey Weinstein controversy, there’s another sector that’s being put under the spotlight for sexual abuse: the modeling industry. While rumors about abuse and sexual harassment of female and male models — and the photographers, agents and others who perpetrated it — have circulated within the fashion world for years, model @cameronrussell started posting stories from models on Instagram last week about abusive situations they’ve encountered — from sexual harassment and molestation to attempted rape. Over 75 have weighed in so far. Read more on WWD.com. Link in bio. #wwdnews
To celebrate its 16th anniversary, @dylanscandybar tapped designers and celebrities to create mosaics out of candy. The mosaics will be auctioned off to support the philanthropic cause of each participant’s choice. Pictured here is the mural created by @aliceandolivia's Stacey Bendet. For a first look at some of the other artwork being unveiled tonight, go to WWD.com. #wwdeye
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye