Hermes to Pay Bonus Dividend as Profitability Hits Record
Hermes International SCA (RMS), the French maker of Kelly bags and silk scarves, reported 2011 profit that beat analysts’ estimates and said it will pay an exceptional dividend.
Operating profit rose 33 percent to 885.2 million euros ($1.2 billion), the Paris-based company said today in a statement. The average of 15 analysts’ estimates compiled by Bloomberg was 857.3 million euros. The company’s operating margin widened to 31.2 percent, the highest since its shares began trading in 1993.
Sales so far this year have been “quite good,” Chief Executive Officer Patrick Thomas said today at a presentation in Paris, declining to provide figures. Italy, where Hermes will open a second store in Rome in 2012, is doing “very well,” he said. The company is aiming for annual revenue growth of 10 percent, the CEO said.
Hermes plans to build two leather factories in France this year as demand for its Birkin and other bags outstrips supply, Thomas said in November. The 175-year-old company’s distinctive positioning should mean so-called organic sales rise 13 percent in 2012, one of the fastest growth rates in the luxury industry, HSBC analysts including Antoine Belge estimated this month.
Hermes proposed an exceptional dividend of 5 euros a share and a regular dividend of 2 euros a share. The shares rose 2.3 percent to 249.80 euros in Paris. The stock has advanced 8.4 percent this year, valuing the company at 26.4 billion euros.
“There is no reason for the share price to remain as high as it is right now,” said Francois Arpels, managing director at Bryan Garnier in Paris, before the results. “It is a fantastic company, but because the float is so little, there’s starting to be some disinterest from investors just because there’s not much trading on the market.”
Hermes will open three stores and renovate 12 others this year as part of its long-term strategy of acquiring expertise and control of its distribution network, Thomas said. A “maison” flagship store will open in Shanghai at the end of 2013, the company said.
“Quite important” raw material cost increases means Hermes will raise prices this year by more than it did last year, Thomas also said.
The 2011 operating margin widened by 3.4 percentage points, matching last month’s forecast. Revenue reached 2.84 billion euros, while net income rose 41 percent to 594.3 million euros.
In December, Hermes’s family owners created a new holding company after LVMH Moet Hennessy Louis Vuitton SA (MC), the world’s largest maker of luxury goods, built up a 22.4 percent stake. The new capital structure should limit speculation of a takeover, according to the HSBC analysts.
LVMH’s stake “hasn’t changed Hermes’s strategy one iota,” Thomas said, adding that the bagmaker intends to stay independent.
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