HERMES NET SKYROCKETS 47%

Byline: Miles Socha

PARIS — Talk about a luxury thoroughbred.
Hermes International saw net profits in 2000 jump 47 percent, to $157.5 million. Operating profits ran ahead 51 percent last year, to $261 million, with the company crediting favorable exchange rates and tight control of administrative and selling expenses.
Separately on Tuesday, Hermes issued a statement to squelch persistent reports that Jil Sander might join the company as its ready-to-wear designer. The speculation, which reached a zenith during the runways shows here last week, prompted Prada Group, which bought a controlling stake in Sander’s company, to issue a statement last week clarifying that Sander cannot, under contract, work elsewhere in the fashion industry until January 2003.
Hermes said it “would like to reaffirm its absolute faith in the two designers who are currently responsible for the rtw lines: Veronique Nichanian for men’s wear and Martin Margiela for women’s wear. The house wishes to assert that it has made no approaches of any kind to anybody.”
Meanwhile, Hermes’s numbers were ahead of analysts’ expectations and represented the company’s eighth consecutive year of double-digit earnings growth. As reported, sales rose 25 percent last year to nearly $1.1 billion, up 14 percent when measured at constant exchange rates. (All figures have been converted from the euro at current exchange.)
“Their pipeline of earnings is one of the most solid in the industry,” said Andrew Gowen, a Lehman Brothers analyst in London. “It’s like watching Pete Sampras play tennis: so predictably good it’s almost boring. I am perfectly happy with these results.”
In fact, given that Hermes is constricted only by supply, which is currently outstripped by demand, Gowen said he had few concerns about the company’s performance in 2001.
In a statement, Hermes said it expects sales to grow in America “despite some economic uncertainties.” And it noted that it plans to open stores in Tokyo, Shanghai, Lisbon, Barcelona, Naples, Basel and Pusan, Korea.
In 2000, Hermes employed some of its cash flow from operations of $198.9 million to finance investments in its store network, expand capacity at its saddlery and leather goods workshops and modernize its silk-printing factories. The investment totaled $89.1 million.
Shares in Hermes rose 0.4 percent Tuesday, to close at $126 on the Paris Bourse.