Hermès Net Profit Jumps to $1.22 Billion

Hermès International said net profit rose 13 percent in 2016 to 1.10 billion euros, or $1.22 billion, representing 21.2 percent of sales.

The maker of Birkin bags and silk scarves reported recurring operating income rose 10 percent to 1.70 billion, or $1.88 billion. Its operating margin stood at 32.6 percent of sales, up from 31.8 percent in 2015 – in line with the company’s target and reflecting the favorable impact of foreign currency hedges.

As reported, Hermès posted record sales in 2016 and confirmed its “ambitious” goal for revenue growth this year, adding to evidence of a recovery in the luxury sector. Revenues rose 7.4 percent at constant exchange rates to 5.2 billion euros, or $5.75 billion, in 2016 — crossing the threshold of 5 billion euros for the first time.

Growth in 2016 was below the 8 percent recorded the previous year, and at its lowest level since 2009. Nonetheless, Hermès has performed better than many of its competitors, which are struggling to adjust to a decline in demand from China, which accounts for one in three luxury purchases worldwide.

The performance was in line with the French luxury firm’s prediction that revenue growth in 2016 could be below its medium-term goal of 8 percent at constant exchange rates “owing to the economic, geopolitical and monetary uncertainties around the world.”

Hermès will propose a dividend of 3.75 euros, or $4.05 at current exchange rates, per share, up from 3.35 euros, or $3.70, the previous year. Net cash amounted to 2.32 billion euros, or $2.57 billion, on Dec. 31, 2016, up around 750 million euros, or $830 million, from the previous year.

All dollar rates are calculated at average exchange rates for the period concerned.

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