Bags carry Hermes to record profit last year

PARIS: A jump in sales of its trademark leather bags helped Hermes International SCA push its annual profit last year above €1 billion for the first time ever, results released yesterday showed.

The French luxury goods maker said its 2016 net profit hit €1.1 billion ($1.2 billion), a 13% jump from the previous year but slightly less than the consensus forecast of analysts surveyed by the financial data company Factset.

The company said in February that sales had hit a record €5.2 billion.

“New records were attained, which proves the solid performance of Hermes this past year,” Hermes chief executive Axel Dumas said during a conference call.

The firm attributed the record performance to a 14% jump in its leather goods and saddlery unit, which includes its famous bags including iconic models such as the Birkin.

Recent investment in new workshops helped Hermes meet the growing demand for its leather goods.

“Development was supported by the sustained pace of deliveries and production, gaining from the capacities of the three new sites in France,’’ the company said in its earnings statement.

Perfume sales also grew, climbing by 9%. Apparel sales were flat and watch sales slowed by 3%.

Sales rose in all geographical regions. The operating margin rose to 32.6% of sales, another record, but much of the 0.8 point gain was due to the favourable impact of foreign currency hedges.

“While Hermes entered 2017 on a solid footing the firm is cautious faced with the global uncertainties that surround us in this very uncertain world,” said Dumas.

Nevertheless, Hermes targets an increase in sales at constant exchange rates. It signalled it would continue to follow its current strategy of keeping control over the creative process and know-how, as well as its communication strategy.

It announced a dividend payment of €3.75 per share, up from €3.35 last year.