Hermès +12% in the first six months: forecasts beaten thanks to handbags

In the quarter going from April to June 2019, Hermès’ sales increased by 14,7% in yearly base (+12,3% at constant rates), for a revenue of 1,67 billion euro. The French luxury brand beat, with this performance, Bloomberg’s expectations, which was expecting revenue for 1,65 billion. The segment “Leather Goods – Saddlery”, which is comprised of leather goods and represents more than half total of the brand’s total turnover, increased by 15,1% (12,2% at constant rates). Meanwhile, the division that includes clothing, belts, fashion accessories, gloves and shoes, grew by 19,3% (16.9% at constant rates).

Semester’s vision
Taking into consideration the entire first semester, Hermès’ consolidated revenue amounts to more than 3,2 billion euro, equal to a 12% increment at constant rates and 15% increment at current rates. Double-digit growth in the period for leather goods (+16%), as well as for clothing and footwear (+18,4%). While with regards to geographic relevance, Asia and China were the markets with the strongest growth (+21,1%), while France (+4%) is the worst performing area.

Focus on leather goods
The growth of the leather goods segment, highlights Hermès, is assisted by “collections that conjugate style, know-how and diverse materials. The yearly growth goals for the different divisions remains unvaried. Demand remains very high for both the classic products of the brand and for other models, such as the Mosaïque and the 24/24 bags”. The note also mentions the investments made by the group in the production area: “The increment in production capacity has continued with the opening of the Maroquinerie de Guyenne in June – continues the note -, which will be completed by 2020, and the new laboratory announced to open in Louviers before 2021. Hermès continues to strengthen its local integration in France with the opening of a training center in Fitilieu (Isère) and the enlarging of the Ganterie-Maroquinerie de Saint-Junien laboratory”.

Scarce profitability
The only negative note in the data published by Hermès has to do with profits. “Operating income as of now is somewhat below the record level shown in the first semester of 2018 (34,5%) – reads the document -, thanks to the leverage effect generated by the strong increment of sales numbers, the unfavorable impact of exchange rates should be somewhat compensated”.

Dumas’ comment
“Hermès sales were very dynamic in the first semester of 2019 in all regions and all business lines – commented Hermès’ executive president, Axel Dumas -. The solid growth reflects the creative push of the brand, the exceptional know-how and the impoirtance of its artisanal model, which contributes to strengthen local integration”. The forecasts remain the same, with the group confirming its sales’ growth goal at constant rates.

 

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