Millennium Post

Luxury giant Hermes made record profit in 2012

Luxury fashion group Hermes, known for silk scarves and handbags, reported on Thursday a record profit for 2012, confirming a stellar performance for France's luxury industry as a whole last year.

Net profit last year soared 24.5 per cent to 740 million euros ($954 million), well above an analyst expectation of between 710 to 720 million euros.

Operating profit during the 12-month period rose by 26.4 per cent to 1.12 billion euros when analysts had been expecting 1.09 million.

The company's operating margin ended the year at 32.1 per cent and was the highest since Hermes, founded in 1837, went public in 1993.

In February Hermes, whick makes the signature Kelly and Birkin bags, reported a 22.6-per cent rise in sales last year to 3.48 billion euros ($4.66 billion). The sales figure exceeded expectations by analysts who had foreseen a figure of about 3.42 billion euros.

Sales were boosted by activity in Asia where the company does most of its business and where it opened two new outlets, one in Taiwan and one in China. Hermes also enlarged six other outlets.Sales in Asia rose by 28.6 per cent and, excluding Japan, they rose by 36.2 per cent, notably owing to demand in China.In America, where the sales network was increased, sales rose by 22.5 per cent.The company said that it was optimistic about the outlook for 2013 but did not make any forecasts.Sales at the company have doubled since 2008.

Last month, French luxury rivals LVMH and PPR also posted bumper profits for 2012.Hermes and LVMH are locked in a bitter legal battle.

Since 2010, LVMH has slowly built up its stake in Hermes, despite bitter protests by the still family-dominated company.By the end of May 2012, the LVMH share of Hermes stood at 22 per cent.

Resisting what it calls a hostile takeover by LVMH, Hermes has filed a legal complaint over the LVMH share-buying spree.LVMH owns a stable of luxury companies including Louis Vuitton, Givenchy and Moet and Chandon champagne.


French business activity contracted at its sharpest rate since 2009 amid a deep confidence crisis for companies in an economy skirting close to recession, according to data released by survey firm Markit on Thursday. Private sector activity from purchasing managers, an important leading indicator of economic momentum, came in at 42.1, down from 43.1 in February and lower than a previous estimate of 42.3.

The result brought France even further from the 50 point mark that separates an economy from expansionary and recessionary trends. ‘It is difficult to find any crumbs of comfort among the data, with new orders and backlogs both declining at sharper rates and employment cuts continuing,’ said Markit Senior Economist Jack Kennedy.
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