Hermes Profit Up 7.8 Percent in Half

Hermes International said on Thursday that solid sales at its retail network helped lift first-half profits 7.8 percent.

Herms remodeled and expanded George V store

Herms' remodeled and expanded George V store.

Photo By Thierry Chomel

PARIS - Hermès International said on Thursday that solid sales at its retail network helped lift first-half profits 7.8 percent.

The luxury giant said it would sell its stake in the high-end Leica camera business for about 15 million euros, or $19.1 million.

For the first half, profits climbed to 184.6 million euros, or $228.4 million at average exchange. While the results met most analysts' expectations, they lagged behind those of Hermès' main luxury competitors.

Last week, PPR said operating income at its Gucci Group division surged 69.6 percent in the first half, and LVMH Moët Hennessy Louis Vuitton reported a 46 percent leap in profits in the first six months, making a firm case for luxury's solid footing.

Mirelle Maury, managing director of finance and administration at Hermès, said the company was on track to meet its full-year target of constant currency sales growth of around 7 percent.

She said sales in August and early this month were robust, led by acceleration in North America and continued strength in Europe.

"There was a veritable acceleration in the second quarter of 12 percent in the Americas," said Maury. "That trend continues in the third quarter."

Maury said first-half sales growth of 6 percent in Japan should help sustain momentum through the end of the year as Hermès prepares to unveil an extension to its Hermès House flagship in Tokyo's Ginza district next month.

Maury added that sales in Europe, which increased 12 percent in the first half, looked set to grow 10 percent in the second half.

Maury said demand for leather goods — including the perennial best-selling Birkin bag and the Paris-Bombay purse — continued to exceed the firm's supply capacity.

She said 300 artisans had been hired in the first half to boost production and existing factories would be expanded in the second half.

First-half gross margin was stable at around 65 percent, she continued, and operating margin reached 26.4 percent, also on par with last year.

Maury said spending on communications and advertising in the first six months through June grew 18 percent. She said communications spending would advance about 20 percent for the full year.

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