After an overall successful year, French luxury fashion manufacturer Hermès is facing headwinds for its most important segment. Because the group was unable to meet the high demand for its leather goods in the final quarter, revenue fell significantly more than analysts had expected. Hermès wants to fight against this and expand production in France. Investors, on the other hand, remained unsettled: Hermès shares lost around 7.5 percent in value at the start of trading on Friday.
In the fourth quarter, sales of leather goods such as Birkin and Kelly bags fell by 3.3 percent to around one billion euros compared to the same period last year, as the EuroStoxx 50 newcomer announced on Friday in Paris. Analysts had expected a much smaller drop in sales. The development is considered problematic because the luxury fashion manufacturer makes almost half of its revenue from leather goods.
Production will be ramped up by 2024
To counteract this, the company will ramp up production at several production sites in France by 2024. For example, production capacities are to be increased by new leather factories in Louviers in Normandy, Sormonne on the border with Belgium and Riom in the Auvergne-Rhône-Alpes region. The management also wants to hire new staff for this, it said.
In addition, Hermès was able to achieve significant increases in sales in all other divisions in the last three months of 2021, even if these contribute significantly less to the total revenue. The group turned over about a third more in shops with clothing and accessories, as well as in perfume and cosmetics articles.
It also helped that customers in the Asia-Pacific region were more courageous in buying Hermès products. Excluding Japan, sales in the region increased by 11.3 percent. The region accounts for more than half of the Group’s sales.
Meanwhile, in 2021 as a whole, Hermès surpassed pre-Corona levels. Revenue increased by around 30 percent compared to 2019 to almost 9 billion euros. The operating result was around half higher than two years ago at 3.5 billion euros. In both cases, Hermès achieved more than analysts had expected.
stock under pressure
However, this did not satisfy the shareholders. After an even stronger fall at the beginning of trading, the Hermès share was still a good 4.3 percent lower in the morning than on the previous day. The price has thus continued its downward trend since the beginning of the year. Since the turn of the year, Hermès shares have lost around a quarter of their value. But that was also because investors tended to sell off more expensive securities amid concerns about higher interest rates.
The bottom line is that the group made a profit of 2.4 billion euros after almost 1.4 billion in the previous year and 1.5 billion in 2019. Hermès wants to pay out almost twice as much to the shareholders for the past year with a total of 8 euros per paper as in each case for the three years before (4.55 euros). (dpa)