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Record profit and exceptional dividend offset lower target for Hermès

By Angela Gonzalez-Rodriguez

27 Mar 2015

Business |ANALYSIS

French luxury house Hermès announced Wednesday record net profits for 2014, as well as its plans to pay out an “exceptional'' dividend of 5 euros per share. Hermès saw growth mainly in Asia, despite the Chinese economy’s slowdown and the protests in Hong Kong.

Hermès bagged 859 million euros in net profits last year, 9 percent ahead last year’s same period. Revenue for 2014 came in at 4.11 billion euros, up by 10 percent.

Noteworthy, sales in Asia grew by 13 percent, despite events in Hong Kong and the general slowdown in China’s market, the company said. In fact, in September, Hermès opened China’s first Maison Hermès in Shanghai.

The group announced in February that it had surpassed 4 billion euros in sales, with turnover up 9.7 percent, or 11.1 percent at constant exchange rates. Main engines for sales growth were North America, where sales surged by 14.5 percent, and Europe, with sales up by 7 percent.

All mayor lines of business grew, with the leather goods and saddlery division rising 15 percent, ready-to-wear and accessories improving by 12 percent, the silk and textiles business line growing by 8 percent, and perfumes posting 10 percent growth.

Lower turnover target sweetened with “exceptional” dividend

Nevertheless Hermès, citing “economic, geopolitical and monetary uncertainties around the world,'' set a lower turnover target for this year of around 8 percent growth at constant exchange rates.

The group said it would propose a 5 euro “exceptional'' dividend on top of a regular dividend of 2.95 euros, up from 2.70 euros in 2013.

Despite the outstanding figures, shares in Hermès were big losers in Europe, falling 1.9 percent in Paris after the French luxury goods maker said foreign exchange rates had dragged its margins lower. Hermès has a strong exposure to Japan, highlight various analysts following the stock.

Market insiders pointed to profit-taking as well as disappointment that the results fell short of expectations. Nevertheless, “Hermès will continue its long-term development strategy based on creativity and maintaining control over its know-how,'' the group said in a statement.

In the past weeks, one investment analyst has rated the stock with a ‘sell’ rating, five have given a ‘hold’ rating and three have issued a buy rating on the company, AnalystRatings.NET reports.

The stock has a 52-week low of 29.17 dollars and a 52-week high of 38.33 dollars, giving the company a current market cap of 35.93 billion dollars and a P/E ratio of 35.04.