Hermes Reports 44% Profit Jump, Says Not Interested in LVMH Collaboration
Hermes International (RMS) SCA, the French maker of Birkin and Kelly bags, reported a surge in full-year earnings and said it’s not interested in collaborating with LVMH Moet Hennessy Louis Vuitton SA (MC), which has built a stake.
Hermes had no contact with LVMH, the world’s largest maker of luxury goods, Chief Executive Officer Patrick Thomas said today at a presentation in Paris. LVMH has built a 20.2 percent stake since October, saying last month that it won’t be a passive investor and can provide strategic and operational help.
“If you want to seduce a beautiful woman, you don’t start by raping her from behind,” Thomas said today.
Operating profit at Hermes rose 44 percent to 668.2 million euros ($933 million), the Paris-based company said, beating the 661.7 million-euro average estimate of 11 analysts compiled by Bloomberg. Sales rose 25 percent to 2.4 billion euros and margins exceeded a forecast that Hermes raised last month.
The results were “stunning,” Marc Willaume, an analyst at Raymond James in Paris, said by e-mail. He has a “sell” recommendation on the shares.
Hermes rose as much as 3.1 percent in Paris trading and was up 2.15 euros, or 1.4 percent, to 153.5 euros as of 12:30 p.m.
Hermes raised its outlook for 2010 operating-margin growth last month after fourth-quarter revenue exceeded analysts’ estimates and helped the company surpass its annual sales forecast. Operating profit as a proportion of sales widened by 3.6 percentage points to 27.8 percent, Hermes said today, beating the revised gain estimate of about 3 percentage points.
“This performance reflects the quality of our corporate model and the efficiency of our staff who implement it,” Thomas said in the statement. At the presentation, he described the company’s performance in 2010 as “exceptional.”
While Hermes aims for average annual sales growth of 8 percent to 10 percent, excluding currency shifts, there is no specific forecast for 2011, the CEO said.
The company will add 13 stores in 2011, including seven in Asia and a second Indian outlet in Mumbai, Thomas said. Hermes will also upgrade 14 boutiques and hire more workers, he said. The maker of silk scarves and ties may modestly increase prices for more-expensive products such as bags, the executive said.
Net cash was 829 million euros at the end of December, an increase from 508 million euros a year earlier. The company will propose a full-year dividend of 1.50 euros a share, including a 1-euro interim payout on Feb. 10.
Net income rose 46 percent to 421.7 million euros, less than the 425.3 million-euro average estimate.
Hermes wants LVMH to reduce its stake by more than half to free shares on the open market, according to Bertrand Puech, who heads the bag maker’s founding family. Even if LVMH doesn’t reduce the holding, nothing will change regarding the running of Hermes, Puech said in an interview last month.
LVMH has said it doesn’t plan to sell its stake in Hermes.
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