Hermes International SCA ((FR:RMS)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Hermès International SCA Earnings Call: Positive Growth Amidst Challenges
The recent earnings call for Hermès International SCA reflected a generally positive sentiment, highlighting strong growth in sales and operating income, expansion in production capacity, and robust geographical performance. Despite these positive indicators, the company acknowledged challenges such as a decline in the Perfume and Beauty division, the impact of a one-off tax, and cautious consumer behavior in China.
Solid Growth in Sales and Operating Income
Hermès reported impressive growth with sales reaching EUR 8 billion, marking an 8% increase at constant rates. The current operating income saw a 6% rise, showcasing the strength of the Hermès model. This growth was evident across all regions, reinforcing the company’s robust market position.
Expansion of Production Capacity
The company is committed to expanding its production capacity with plans to open four new leather workshops over the next four years. Notably, the Maroquinerie de L’Isle d’Espanac in Charente is set to open in September, underscoring Hermès’s strategic focus on enhancing its production capabilities.
Strong Geographical Performance
Hermès experienced growth across all regions, with Europe (excluding France) up 13%, France up 9%, Japan up 16%, Asia up 3%, and America up 12%. This widespread geographical success highlights the global appeal and strength of the Hermès brand.
Leather and Saddles Division Growth
The Leather and Saddles division reported a 12% growth, maintaining its annual trajectory through increased production capacity. This division continues to be a cornerstone of Hermès’s success, driven by strategic investments and market demand.
Financial Robustness
Hermès demonstrated financial robustness with an operating income of EUR 3.3 billion and a net profit of EUR 2.5 billion, both up 6%. The company’s adjusted available cash flow stands at EUR 1.8 billion, reflecting its strong financial health.
Perfume and Beauty Division Decline
The Perfume and Beauty division saw a 4% decline in sales, attributed to the launches of Barénia and a strong Q2 in the previous year. This decline highlights the challenges faced in maintaining growth in this segment.
Impact of One-off Tax on Large French Companies
Hermès’s tax expense was significantly impacted by a one-off tax on large French companies, adding EUR 260 million to costs and increasing the tax rate by 7.5%. This one-off tax has affected the company’s financial metrics for the period.
Challenges in China
Despite overall growth, Hermès noted that Chinese clients are saving more and spending less due to economic uncertainty, affecting sales momentum. This cautious consumer behavior presents a challenge in maintaining growth in the Chinese market.
Forward-looking Guidance
Looking ahead, Hermès plans to continue its investments in production capacity, particularly focusing on leather workshops, to drive robust growth across all divisions and geographical areas. The company emphasized its commitment to sustainability and social responsibility, with initiatives such as a bonus of EUR 4,500 distributed to all employees worldwide and an employment rate of 7.9% for people with disabilities in France.
In conclusion, the Hermès International SCA earnings call painted a picture of strong growth and financial health, with strategic expansions and investments paving the way for future success. While challenges such as the decline in the Perfume and Beauty division and cautious consumer behavior in China persist, Hermès remains well-positioned to navigate these hurdles and continue its trajectory of growth.