Wednesday, March 25, 2015

Hermès Profits Take a Dip Going Into 2015

Hermès Profits Take a Dip Going Into 2015:

A look from the Hermès fall 2015 show. Photo: Imaxtree
A look from the Hermès fall 2015 show. Photo: Imaxtree
With the exception of its watch business, we rarely have anything negative to report about Hermès's financial state. This is one robust luxury house. 2014 was another bright year for the company, with sales up 7 percent, on par with the 8 percent increase the company saw between 2012 and 2013. The only negative? Operating margin declined slightly to 31.5 percent, from last year's all-time high of 32.4 percent.

Growth was strongest in the U.S. (up 15 percent) and the weakest in Europe (up 7 percent). Sales in Asia, which have been growing rapidly, slowed a bit; both Japan and the rest of Asia saw a 13 percent boost in revenue.

As usual, leather goods were the brand's most successful category, up 15 percent for the year. Sales of ready-to-wear were solid as well, up 12 percent. Watches, however, continued to be a major weak spot: Sales declined 11 percent, compared to a 1 percent increase the year before. The company blames a "decline in the market, particularly in China."

Hermès says it expects to see similar growth levels — about 8 percent — in 2015. That's solid, but lower than the 10 percent increase the company forecasted in the middle of last year. Currency shifts, and Europe's uncertain economic climate, are to blame. It will be interesting to see how sales of ready-to-wear perform once Creative Director Nadège Vanhee-Cybulski's first collection hits the sales floor.

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