Hermès reports an excellent year 2016

At the end of the 2016 financial year, consolidated group sales passed the 5 billion Euros mark to reach 5.202 billion.

They were +7.5% higher at current exchange rates and +7.4 % at constant exchange rates. The operating result, up by 10%, stood at 1.697 billion (32.6% of sales) with the net result at 1,100 million, 13% higher than before.

The robust sales growth achieved in 2016 by the group retail outlets (+8%) is explained by expansion in every geographical zone. Hermès continued the qualitative development of its distribution network with four boutiques inaugurated and several others refurbished and enlarged.

Japan (+9%) posted strong performance thanks to its selective distribution network, despite the gain in value of the yen and a high comparison base. Asia excluding Japan (+7%) continues to grow, especially with the enlargement of the stores at Liat Towers and Takashimaya in Singapore and the new retail outlets opened in Macao, at Hong Kong Airport and Chongqing, in China. In Continental China, the group continues to develop although the environment remains challenging in Hong Kong and Macao.

America (+7%) reported strong progress in a contrasting environment. The stores in Hawaii and Philadelphia were refurbished and enlarged at the end of the year. Europe (+8%) is growing, with an impressive performance which confirms the company’s strength despite the impact of recent events. The outlet at Bocca di Leone in Rome, enlarged and refurbished in October, has proved a great success. France (+5%) is advancing strongly.

The year’s growth was founded on the success of Leatherwear-Equestrian which confirmed its role as a pillar of the group. Activity also benefited from a favourable dynamic at the end of the year in some sectors such as Silk and the Garments and Accessories division. Growth of Leatherwear-Equestrian (+14%) was remarkable thanks to the success of the collections and the diversity of the models, including in particular the Constance, Halzan and Lindy bags, alongside the Birkin and Kelly. Its development was boosted by the sustained pace of deliveries and production which benefited from the capacities of the three new sites in Charente, Isère and Franche-Comté. Investment in a third site in the latter region is continuing.

The Garments and Accessories division, stable over the year, gained 4% in the fourth quarter, boosted by the success of the latest collections of women’s prêt-à-porter and fashion accessories, especially footwear. The Silk & Textiles activity (-1%) proved particularly dynamic in the fourth quarter after being penalised by events in Europe and the slowdown of sales in greater China in the first half.

Fragrances (+9%) are growing, thanks largely to the success of Terre d’Hermès, the launch of Galop d’Hermès and the latest creations such as Colognes, Eau de néroli doré and Eau de rhubarbe écarlate. Watchmaking (-3%) was penalised by a market that remained difficult and a high year-end comparison base. Hermès’ other activities (+2%), consisting of Jewellery, Hermès Art of Living and Table Arts, continued to expand.

The recurring operating result gained 10% to reach 1,697 million Euros against 1,541 million in 2015. The operating margin (32.6% of sales) was up 0.8 point against 2015, largely because of the favourable impact of exchange rate hedging. The consolidated net result, group share, up 13%, stood at 1,100 million, equivalent to 21.2% of sales.

Operating cash flow reached 1,439 million, up 18%. It enabled all the operational investments to be financed (262 million) and the ordinary dividend (350 million) paid out. After allowing for the reduced need for working capital, net cash flow was nearly 750 million higher, reaching 2,320 million at 31 December 2016.

In 2016, Hermès International bought back 319,621 shares at a cost of 110 million, excluding movements made within the framework of the liquidity contract.

The Hermès group increased its workforce by 590 persons, including more than 400 in France, primarily in the manufacturing facilities and sales teams. At the end of 2016, the group had 12,834 employees, including 7,881 in France.

Thanks to its unique business model, Hermès is continuing its long-term development strategy founded on creativity, expertise and exceptional communication.

In the medium term, despite growing economic, geopolitical and monetary uncertainties across the world, the group has confirmed an ambitious sales growth target at constant rates. 2017 will be an opportunity to celebrate the “Sense of an object”.

At the General Meeting scheduled for 6 June next, a proposal will be made to set the dividend at 3.75 Euros per share. The instalment of 1.50 Euros paid on 24 February 2017 will be deducted from the dividend to be decided by the General Meeting.

April 06, 2017