HERMES NET PROFITS CLIMB 33% IN 1ST HALF

Byline: Katherine Weisman

PARIS — Helped by a pickup in Asian economies and some lower tax rates, Hermes International announced Thursday that net profits rose 33 percent to $48.8 million for the first half from $36.7 million a year ago.
Operating profits for the group rose 15.1 percent for the period to $82.4 million, compared with $71.6 million. The rise in profits comes with a 15.6 percent growth in first-half sales to $436.2 million, as previously reported.
Dollar figures are translated from the French franc at current exchange.
Profits, like sales, were boosted by store enlargements and openings worldwide and the recovery of several Asian markets that had slowed for Hermes in 1998, the company said. All Hermes products enjoyed growth during the half, except for silk goods.
Chairman Jean-Louis Dumas attributed the growth in part to the overall effect of Martin Margiela’s fashion on the house.
“The image of Hermes, thanks to a renewal coming from the ready-to-wear, is evolving towards a more-lifestyle brand,” Dumas said, explaining the surge in sales. He is also enthusiastic about the “new generation” of Hermes stores, like the new 4,400-square-foot shop in Milan, which is expected to continue fueling sales.
Profits also benefited from a lowering of corporate taxes in France and in Japan. Additionally, a change in accounting for French taxes added $2.7 million to the Hermes coffers.
Hermes sales in North and South America posted a gain of 17 percent, with the U.S. enjoying the strongest rate of growth, Dumas said. Existing stores posted strong sales, as did more recently opened units in Las Vegas, Atlanta and Buenos Aires.
Sales in Asia grew 14 percent for the half, with growth coming mainly from Japan and Korea. In the first half, Hermes acquired property in Seoul with the intention of opening a new flagship in the next few years. Work also began on the new Tokyo flagship, which should open at the beginning of 2001. Dumas noted that the economic recoveries in Singapore and Hong Kong helped boost Asian sales for the period.
In the current half, new wholly owned stores will open in Korea and Taiwan. The company is also buying back its franchised stores in Berlin and Marseilles. Work has started on the New York store on Madison Avenue, which is expected to open sometime next year, the company said.
Leather goods enjoyed sales growth of 30 percent, with products like the Herbag leading the way. Sales for the house’s jewelry, shoes and home products rose 50 percent for the half, the company said. The company provided little detail about its rtw sales other than to say that “the collections were well received.”
In the next few weeks, Dumas said, Hermes is expected to close on its previously announced $24.2 million purchase of 35 percent of Jean-Paul Gaultier. Once the deal is concluded, both parties can study possibilities for Gaultier’s retail expansion, Dumas said.
Dumas stressed that in this day of mergers and acquisitions, Hermes is not on the prowl for further purchases.
“When you have one of the best brands in the world, with 14 different product categories, why not invest in our own brand?” Dumas asked. But that is not to say that Hermes would decline an opportunity to invest in a company “that shares our values.”

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