RTW, Asia and Americas boom for Hermès as 2019 sees strong growth
Feb 27, 2020
The head of French luxury big-hitter Hermès was upbeat on Wednesday with Axel Dumas hailing the firm’s “outstanding performances” last year as he released its 2019 results. He said the company saw “balanced growth” in all its business lines and in all geographical areas.
And speaking afterwards to reporters, he said the situation in China is beginning to normalise with only four of the firm’s 43 stores there still shut due to the coronavirus, compared to 11 earlier. The company hasn’t had to close any of its Italian workshops so far either. That said, he added that it’s still too early to estimate the full impact of the outbreak on the business.
Dumas didn’t share any details about current trading and said that despite “economic, geopolitical and monetary uncertainties around the world,” Hermès confirmed “an ambitious goal for revenue growth at constant exchange rates”.
So what actually happened last year? The company said it saw “exceptional sales and growth” as revenue rose 15.4% at current exchange rates to €6.883bn and 12.4% at constant rates. Recurring operating income was up 13% to €2.339bn and net profit reached €1.528m from €1.4bn in 2018.
Importantly, growth continued in Q4 in all regions, despite well-publicised challenges during the period, with revenue rising 13.4% to €1.871bn in the quarter, although that figure and the 10.7% constant currency rise did represent a slowdown.
The company has been upgrading its stores and opening new ones and this paid off as revenue generated in its own stores rose 13% last year.
Geographically, in Asia excluding Japan, revenue rose 17.8% at constant exchange rates to €2.589bn and the firm saw strong growth in Greater China (“despite the impact of events in Hong Kong in the last quarter”) and in South Asian countries. The region benefited from sore revamps and openings as well as the continued development of its digital platform and it rolled this out in Singapore and Malaysia in October.
Japanese sales rose 8.2% to €864m, “with the year-end impacted by anticipated purchases due to the VAT increase in October”. Digital was key here too and the new platform, hermes.jp, was launched in June.
The Americas saw a 12% revenue rise to €1.24bn after recent store openings in New York’s Meatpacking district and in Waikiki in Honolulu. The San Francisco store was also extended and reopened in November and the company said it enjoyed “dynamic growth” both in the US and in the other countries in the area.
Europe excluding France, was slower but still grew 8% to €1.2bn, “driven in particular by the United Kingdom and Italy,” which is perhaps a surprise given the economic issues in those two countries. In November, Hermès also opened its first store in Poland with a Warsaw debut. Meanwhile, France also posted 8% growth to €867m, “despite the negative impact of the events at the end of [the] year”. In fact, France's Q4 growth was 13.5%.
As far as its product units were concerned, the key Leather Goods and Saddlery operation saw “sustained demand” with an 11.3% constant currency revenue rise to €3.414bn as consumers splashed out both on “re-invented classics and other models such as the Mosaïque, 24/24 or Twins bags”.
The company is working to expand its production capacity to meet this demand and further workshops are due for completion during this year with more to be set up in 2021 and 2022.
But while many companies may look at 11.3% higher revenue as a spectacular result, the big news for Hermès was that its other divisions performed better. It said it benefited from “outstanding performance” in the Ready-to-Wear & Accessories and Jewellery units with a 17% rise to €1.574bn for the former. This was “thanks to the success of the men’s and women’s ready-to-wear collections, and fashion accessories, particularly shoes”.
Meanwhile, the Silk and Textiles business line posted a more muted (but still good) 7.5% increase to €592m. It said both the SS19 and AW19 collections “received a very warm welcome”.
It added that Perfumes improved 4% to €326m, driven particularly by the success of Terre d’Hermès and Twilly d’Hermès, and by the new variations Un Jardin sur la Lagune and Twilly d’Hermès Eau poivrée. The company has recently moved into the lipsticks category so this should help to boost its beauty operations further going forward.
The Watches business line was up 12% to €193m and it said the new women’s watch Galop d’Hermès was well received.
Other Hermès business lines, which include Jewellery, Art of Living and Hermès Table Arts, were up a strong 20% to €258m, with a “good increase in Jewellery, particularly thanks to high-end collection, illustrated by the Black to Light collection”.
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