PARIS — Citing net profits that rose 6.8 percent last year to $228.2 million, Hermès International said Thursday that it would press ahead with its expansion drive despite a “difficult” international political climate.

This story first appeared in the March 21, 2003 issue of WWD. Subscribe Today.

Hermès plans to add 15 sites, and expand and renovate “many” other units, while enlarging two major leather goods factories in the Lyon and Ardennes areas.

“The Hermès group plans to vigorously pursue its strategy of creating, developing its know-how, expanding its store network and its production capacity,” the company said in a statement, declining to specify its sales or earnings targets.

Analysts have characterized Hermès as one of the luxury brands best positioned to weather the uncertain economic and political climate. Earlier this week, Morgan Stanley luxury analyst Claire Kent upgraded Hermès’ stock to equal-weight from underweight, largely because the stock underperformed the industry by some 16 percent over the past six months.

“We continue to believe that the Hermès brand will be one of the most resilient brands in a weak environment, and therefore see limited potential for either earnings disappointment or continued stock underperformance,” she wrote. “In addition, we see Hermès as a nest egg for long-term investors.”

Kent also praised the company’s “first class” management and “good” brand momentum.

Last year, operating profits rose 4.3 percent to $339.1 million compared with $325.2 million a year earlier. Dollar figures are converted from the euro at current exchange. Operating margins were 25.8 percent, while net margins were 17.3 percent compared with 16.4 percent a year ago.

Sales inched up 1.3 percent to $1.32 billion, as reported. Japan lead regions with a 17 percent increase and the Americas were up 4 percent. Excluding currency fluctuations, sales for the year moved ahead 5.9 percent.

Investments last year totaled $107.6 million, with about half going to open five new units and renovate 12 branches. The Hermès network consists of 216 stores, of which 114 are directly operated. Hermès said investments in stores, a real estate complex in Hong Kong and a new logistics center in Paris were financed by a cash flow last year that totaled $289 million. The company noted that China is a priority for Hermès in coming years.

At its shareholders’ meeting scheduled for June 3, Hermès will ask for approval of a dividend of $1.75 a share, excluding a tax credit. Shares in Hermès slipped 4.1 percent to $123.90 on the Paris Bourse.

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