Hermes delivers record 2016 profit margin

PARIS: French luxury goods group Hermes said on Wednesday it was starting 2017 on a solid footing after delivering record 2016 profits, providing further evidence of a broader recovery in the luxury goods industry.

Chief Executive Axel Dumas nevertheless struck a cautious note for the year given underlying global political and economic uncertainties.

“We did better than we expected in 2016 and we are entering 2017 on a solid base but remain cautious in view of an uncertain environment,” Dumas told a conference call.

Hermes, known for its $10,000 Birkin bags and $400 printed silk scarves, said net profits had risen by 13 per cent rise to a record 1.1 billion euros ($1.19 billion).

Its operating margin hit an historic high of 32.6 per cent of sales against 31.8 per cent in 2015, while the company also increased its dividend by 12 per cent.

Hermes added it was keeping an “ambitious” medium-term goal for revenue growth at constant exchange rates.

The company’s sales growth had mainly stemmed from a strong performance at its leather goods arm, which makes 50 per cent of group sales, while other divisions also performed well although its watches unit lagged.

Hermes joined other luxury companies such as LVMH and Kering in reporting an improvement in the sector, which has suffered from slowing demand in China, while Islamist militant attacks in France have also deterred tourists from Europe. — Reuters