Hermès Profit Rises, and Not Just in Asia

PARIS — Hermès International, the French maker of leather handbags and scarves, on Thursday reported a sharp increase in annual sales and profits, the latest luxury house to report strong growth.

The company, founded in 1837, reported revenue of €3.5 billion, or $4.5 billion, for last year, up 23 percent from 2011. Net profit rose 25 percent, to €740 million, better than the €709 million that analysts surveyed by Reuters had been expecting.

Hermès said its operating margin, a measure of profitability, came in at 32.1 percent, the highest level since the company’s shares were listed on the stock market in 1993.

Despite the crisis in the euro zone, weak growth in the United States and a mixed economic performance in China, wealthy consumers continue to spend, lifting sales of top-line cars, watches, wine and clothing. LVMH Moët Hennessy Louis Vuitton, the biggest luxury company, said in January that its 2012 sales rose 19 percent from a year earlier, to €28.1 billion, as net profit rose 12 percent, to €3.4 billion.

The Hermès lineup includes ready-to-wear clothes, jewelry, watches and perfumes, which it sells to an exclusive clientele: A single Birkin handbag can cost more than $10,000.

The company said sales in Asia excluding Japan rose 25 percent from a year earlier, while Japanese sales grew 7 percent. European sales, which include products sold to Asian visitors to the Continent, rose 15 percent, and sales in the Americas grew 14 percent.

“It’s not just an Asian story,” said Catherine Rolland, a luxury analyst at Kepler Capital Markets. “They had strong growth in all regions.”

Ms. Rolland said she expected the company to post “double-digit sales growth” this year, growing faster than its rivals in the luxury sector. The main concern for the industry, she said, was the outlook for China, and in particular a clampdown on gift-giving in the country.

The Hermès family is fighting to keep the company independent of Bernard Arnault, the chief executive of LVMH, who has built a stake of more than 22 percent in his smaller rival. Prosecutors in Paris said last week that they were investigating whether Mr. Arnault violated insider trading rules to build his stake without notifying the exchange.

The French market regulator, the Autorité des Marchés Financiers, has been investigating Mr. Arnault’s actions since late 2010, and is expected to render an opinion on the matter by the end of the summer.

Article source: http://www.nytimes.com/2013/03/22/business/global/hermes-profit-rises-and-not-just-in-asia.html?partner=rss&emc=rss