Leter to the Stockholders - April 2009
A Message from the Chief Executive Officer, Inspired by the colours and vitality of Indian Fantasies, its annual theme for 2008, Hermès once again posts improving results. Surprising new designs, the excellence of our craftsmen and women, the sense of detail in our finishes, and our constant attentiveness to the wishes of clients, have once again been the platform for growing sales and profits. Demand remained strong for our leather products, especially leather bags, but sales of ready-to-wear, fashion accessories and articles in silk and other textiles also progressed strongly. After the spectacular results for 2007, growth of our perfumes was more moderate in 2008, while art of living, watches and jewellery were affected by the end-of-year gloom in the markets. New stores continued to open and existing ones to be renovated at a good pace, thereby contributing to our retails sales in all countries, including India, where Bertrand Puech and Patrick Thomas. Hermès opened its first outlet in May. Thanks to spectacular growth in Asia (except Japan), and also in the Americas and Europe, an almost perfect geographical balance of our different markets was achieved. The modest increase in sales observed in Japan in the first six months was cancelled out by the stock market tumble at the end of the year. Among the many new initiatives were the creation of the Hermès Foundation in April, and the awarding of the first Émile Hermès Prize for design. Plans for a new Maison Hermès in Shanghai were also finalised. Prospects for 2009 are uncertain, and the effects of the economic crisis are already being felt in several parts of the world. Nevertheless, we enter the year with confidence based on strong results, healthy margins and, above all, the human and ethical values that have been the foundation of this House s success for six generations now. The theme of Beautiful Escapes, an invitation to experience the beauty of the world, and to inner discovery, will help us provide the element of dream that we all need. Patrick Thomas Émile Hermès SARL Chairman Chairman, represented by Bertrand Puech
Sales and current operating profit growth above 8 % Executive Management presented the audited financial statements for 2008 to the Supervisory Board at its meeting of 18 March 2009. These reflect sales growth of 8.6%, or 10.2% at constant exchange rates, and an 8.4% increase in current operating income. Earnings per share moved up 1.8%. The Hermès Group reported sales of 1,764.6m in 2008, a yearon-year rise of 10.2% at constant exchange rates and of 8.6% at current exchange rates. Restated for the acquisition of the Soficuir group, like-for-like sales growth at constant exchange rates came to 8.6% in 2008. During the fourth quarter, despite the economic downturn and owing to an excellent year-end, sales expanded by 6.2% at current exchange rates. 1765 1331 2004 1427 2005 1515 2006 Sales (in M ) 1 625 2007 2008 All regions registered growth, with the exception of Japan (like-for-like, at constant exchange rates) ------------------------------------- Hermès continued to expand its distribution network in 2008. It opened twelve new branches and renovated or enlarged thirteen other locations. In Europe, sales advanced by 7% over the full year despite a slowdown in the fourth quarter. The Group renovated five branches during the year. In the Americas, following a handsome performance over the first nine months, sales expanded by 15% over the full year. The distribution network was enlarged in November with the opening of a new branch in San Diego. In Japan, in a lacklustre business climate, overall sales contracted by 3% despite a 1% increase in retail sales. In non-japan Asia, sales growth remained impressive over the full year, at 22%, including in the fourth quarter (up 25%). Business momentum was driven primarily by robust expansion in China. The Group continued to enlarge its distribution network in 2008, with the addition of eight new stores three in continental China, two in Macao and its first location in India, in New Delhi. Silks & Textiles, Leather Goods & Saddlery and Fashion expanded vigorously (like-for-like, at constant exchange rates) ------------------------------------- The success of the new silk collections for women, with their new, innovative designs, pushed up Silks & Textiles sales by 11% over the year. Leather Goods & Saddlery sales were up 14% in 2008, with growth propelled by leather bags. Sales for the Ready to Wear & Fashion Accessories division rose by 10%, underpinned by the new ready-to-wear collections and the development of fashion accessories. Perfumes registered a 6% advance, driven by the success of Terre d Hermès and the enlargement of existing lines. Following an excellent year in 2007, sales receded by 4% in Tableware and by 5% in Other Hermès Sectors (Jewellery & Art of Living) owing to adverse economic conditions in the fourth quarter. In Watches, sales dipped 9%, primarily due to the Japanese market.
Earnings growth New jobs created in 2008 ----------------- ------------------------- Current operating income advanced by 8.4% year-on-year, to 449.2m in 2008 from 414.5m in 2007. The current operating margin remains steady at 25.5% of sales. Following exceptional income recognised in 2007, the Group s consolidated net income edged up by 0.8% to 290.2m from 288m in the previous year. Earnings per share were 1.8% higher. At constant exchange rates, current operating income would have advanced by 17% and net income by 9%. The Group created 439 new jobs, including 263 in France. Hermès had 7,894 employees at the end of 2008, most of them in production and sales. Sustained investments in 2008 Outlook for 2009 ------------------ The trend at the beginning of the year is in line with the target of steady sales. At the end of February, consolidated sales were up slightly owing to the favourable currency trend. At constant exchange rates, sales for the Group s own stores were higher. However, consolidated sales were a bit lower than in the same year ----------------------------------------- Hermès investments came to 160m. They were dedicated primarily to expanding the distribution network and increasing production capacity. Hermès International acquired an additional stake in Jean Paul Gaultier, thereby lifting its interest in that group from 35% to 45%. Hermès also bought back 50.9m of its own shares and cancelled 48m of these during the year. Cash flow was 378.9m in 2008, 6.3% higher than the 356.6m registered in 2007. Net cash amounted to 450m at the end of 2008. 247 268 288 290 2007 2008 214 2004 2005 2006 Net income (in M ) ago period owing to the contraction in sales to specialised distribution networks, Hermès will continue to follow its long-term strategy of maintaining control over its know-how and distribution network. The Group will continue to invest significantly in expanding its distribution network. It will open or renovate over twenty stores in 2009, primarily in Asia and in the United States. Hermès activity will continue to be driven by its craftsmanship and creative spirit. Proposed dividend ------------------- At the Annual General Meeting, the shareholders will be asked to approve a dividend of 1.03 per share. The Annual General Meeting will take place on 2 June 2009. The complete consolidated financial statements will be available by no later than 30 April 2009 at www.hermesinternational.com and on the AMF website at www.amf- france.org.
2008, Indian Fantasies Hermès International Partnership limited by shares with capital stock of 53 830 506.13 euros - Registered Office: 24, rue du Faubourg-Saint-Honoré - 75008 Paris, France. Commercial and Company Register of Paris no. 572 076 396 An Éditions Hermès publication. Graphic design H5 (Rachel Cazadamont). Photo Michel Labelle. Illustration : adaptation of Indian Dust silk twill carré designed by Benoît Pierre Emery. Hermès, Paris 2009.