May 17, 2017 | By WGSN Insider
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Feb 12, 2015
Hermès on Thursday showed it’s still a leader of the luxury pack, delivering Q4 sales that many would envy. But the French fashion house also showed its vulnerable side with a surprise cut in its full-year 2015 outlook.
So what’s gone wrong? Hermès lowered its annual sales growth target to 8% currency-neutral from 11% – the first cut in years – alongside an expected dip in operating margins “in the region of 31%” from 32.4% a year ago. It cited “economic, geopolitical and monetary uncertainties over the world.”
The company got some advance notice of the issues that are going to affect 2015 with its watch business that started to falter in 2014. Sales there were down 11% “penalised by the decline in the market, particularly in China”.
But, watches aside, it can’t be denied that the company had a good year in 2014. It saw “remarkable” growth in leathergoods, up 15%. This was closely followed by a 12% rise in ready-to-wear and accessories (with footwear starring, unsurprisingly given the fashion moment that designer footwear is having).
With all that going for it, Hermès posted a near double-digit rise in overall Q4 sales, just short analysts’ expectations.
Retail success, especially in the Americas on stronger demand from US shoppers, was key.
Group consolidated revenues rose 11.1% to €4118.6m and grew 9.7% after adjusting for the negative impact of currencies, primarily due to the weakness of the yen.
For Q4, sales grew 9.6% currency neutral following “buoyant activity” in the group’s own stores, up 11.6% currency neutral, and up 12.7% for the year.
Across 2014, all regions posted strong growth with the Americas up 15% confirmed its development potential, it noted. Japan, up 13% “achieved an excellent year”, confirming the positive trend observed in the first nine months.
Non-Japan Asia sales also jumped 13%, described as a “good performance” in an environment affect by pro-democracy protests in Hong Kong and the slowdown in China’s luxury market, it said. European sales also rose 7% and “continued to progress in a difficult financial climate”.
In its product line-up, its Silk and Textiles business rose 8% while Perfumes lifted 10%.‘Other’ Hermès sector, which includes jewellery, saw sales rise 15%.
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