Hermès posts strong 2005 results

Despite coming in shy of analysts’ expectations, luxury fashion house Hermès International recorded strong results for fiscal 2005. Sales for the year were up 7.2 percent to 1.43 billion euro (£983 million). The fourth quarter saw sales rise 8 percent to 437.1 million. The company reported “excellent” consumer reaction to its new fragrance Un Jardin sur le Nil, which boosted perfume sales by 12.5 percent for the year. Meanwhile, full year sales of its women’s ready-to-wear division – designed by Jean Paul Gaultier – climbed 7.6 percent.

The company’s managing director of finance and administration, Mireille Maury, pointed out to WWD that growth had accelerated in the second half and that December had been a “very good” month, with sales up 17 percent in Europe. She added that an increase in margins would allow Hermès to reach double-digit gains in operating profits. This year Hermès will open and renovate 30 stores, as opposed to eight in 2005. Openings are planned in Seoul, South Korea; Amsterdam; Charlotte, North Carolina; Bankgok, and Hangzhou, China. Meanwhile, the store in Tokyo’s Ginza district will be expanded in October.

Sales rose across the board in the quarter ended 31 December. Europe, excluding France, saw sales increase 16.9 percent to 79.1 million euro. Sales in Japan, which accounts for 29 percent of total sales, rose 7.2 percent to 128.5 million. The Asia-Pacific region enjoyed a 7.9 sales increase to 68 million, while the Americas saw only a modest rise of 1.3 percent to 69.7 million. Hermès blamed this on fewer selling days, though Maury pointed out that the “trend there remains good”.

Sales of bags and luggage rose 5.4 percent to 169.2 million euro. The company attributed the growth to increased production capacity, but also said that demand still exceeded supply. Maury said that the Birkin, Kelly and Bolide models were still the most popular leather handbags. Goldman Sachs analyst Jacques-Franck Dossin welcomed management’s decision to cut production of canvas bags, which posed a threat to the company’s brand image. In a research note he wrote that these “were initially launched as beach bags, but became increasingly used as city bags, particularly in Japan.”

The sale of ready-to-wear and accessories grew 7 percent to 79.7 million in the quarter. The sale of watches lost ground, however, dropping 2.1 percent to 33.2 million euro.

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