Hermès International: 2020 Half year Results
HERMÈS INTERNATIONAL
In a context of gradual improvement which
began in June, first-half results were strongly penalised by store
closings
At the end of June, revenues were down -24% at
current exchange rates and -25% at constant exchange rates,
recurring operating profitability reached 21.5% of sales
Paris, 30 July 2020
The first half of 2020 was marked by an
unprecedented health and economic crisis in scale, duration and
geographic extent. As expected, the pandemic intensified in the
second quarter in Europe, America and again in certain Asian
countries, leading to the temporary closure of the stores in
compliance with the various governmental directives, and the
stoppage of the production sites in France and Europe to protect
all the employees.
The group’s consolidated revenue in the first
half of 2020 amounted to €2,488 million, down -24% at current
exchange rates and -25% at constant exchange rates. Sales trends in
the second quarter (-41% at current exchange rates and -42% at
constant exchange rates) reflect the impacts of the health crisis
on the network. Recurring operating income amounted to €535 million
(21.5% of sales) at the end of June. Net income reached €335
million (13.5% of sales).
Executive Chairman of Hermès, Axel Dumas,
said:"This unprecedented crisis, which began at the start of the
year and is still ongoing, allows us to test our business model’s
strength. True to its values, the group has preserved jobs and
maintained the basic salaries of its employees worldwide without
having recourse to the exceptional governmental subsidies provided
in various countries. I am proud of the teams’ dedication, and the
courage, commitment and generosity they have shown. I want to thank
them. The loyal clients, desirable collections, agile omnichannel
network and independence of the group are the pillars that give us
confidence in the future and will support our recovery."
Sales by geographical area at the end of
June(at constant exchange rates unless otherwise indicated)
In the first half 2020, all the geographical
areas were impacted by the health crisis and stores’ closure. The
revenue generated in the group’s stores was down -22% at constant
exchange rates, they are gradually recovering.
- In Asia excluding Japan (-9%), all stores reopened in Mainland
China in March, and sales are growing strongly, while activity in
Hong Kong and Macao remains down due to border control measures.
Several countries in the region experienced a second wave of store
closures, including Singapore until mid-June, Australia and
Thailand. A new flagship store opened in Sydney in June, and the
stores in Guangzhou in Mainland China and Bellavita in Taiwan
successfully reopened in April and May after expansion. The rollout
of the new digital platform in Asia continued in Hong Kong and
Macau in February and in Korea in June, in a context of very strong
growth in e-commerce sales.
- In Japan (-23%), following the Japanese government’s
announcement of a state of emergency, most stores were closed in
April and May for about 6 weeks. The recovery is particularly
dynamic thanks to the loyalty of local customers. Sales were
especially strong on the new hermes.jp platform.
- America (-42%) was affected by total store closings for more
than 10 weeks in the United States, as the other countries in the
region, with a very gradual recovery at the end of June. The
Montreal store, enlarged and renovated, reopened in
June.
- Europe excluding France (-36%) and France (-38%) have been
strongly affected by the reduction in tourist flows. After the
closure of the entire European network for an average of 9 weeks,
stores gradually reopened in Germany late April, in France mid-May,
in Italy and Spain late May and in the United Kingdom
mid-June.
Sales by business line at the end of
June(at constant exchange rates unless otherwise indicated)
Leather Goods and Saddlery posted a decrease
(-23%) due to the closure of stores in the various geographic
areas. Hermès closed its production sites in France mid-March to
protect employees for four weeks and reopened gradually, except for
the Hermès Perfumes site in Le Vaudreuil which began producing
hydro-alcoholic gel. Investments in production capacity have been
maintained, with the continuation of the Guyenne and Montereau
leather workshops, and the projects in Louviers and in the
Ardennes. Hermès continues to strengthen its local integration in
France.
The Group's other business lines were also
strongly impacted by store closures in the second quarter, after an
excellent month of January which had benefited from the favorable
dynamics of the Chinese New Year. The Ready-to-wear and Accessories
(-29%) and Silk and Textiles (-39%) business lines were further
penalized by the traffic declines.
Perfumes were down (-29%), despite the very
successful launch of the Beauty line with the first lipstick
collection early February, as were Watches (-19%). The other Hermès
business lines (-4%) have held up particularly well thanks to
Jewellery and Home universe.
Impact of the health and economic crisis on
results in the first half
Attached to its commitment as a responsible
employer, Hermès saw its operating profitability impacted by strong
vertical integration and the weight of fixed costs, consisting
mainly of payroll and amortisation of investments and leases.
Recurring operating income reached €535 million
compared €1,144 million in the first half of 2019, and the
recurring operating margin amounted to 21.5% compared to 34.8%.
Consolidated net profit (Group share) was €335
million versus €754 million at the end of June 2019.
Operating investments (€162 million) reflected
the decision to pursue the group's strategic projects.
The restated net cash position amounted to
€3,922 million compared to €4,562 million as of December 31, 2019.
The decrease results mainly from the payment of the ordinary
dividend (€474 million) and share buybacks.
Workforce
The Hermès group increased its workforce by
almost 300 people, mainly in production. At the end of June 2020,
the group employed 15,698 people, including 9,773 in France.
Covid-19 crisis – Support and responsibility
at Hermès
As announced on 30 March, Hermès' economic and
financial solidity enables the Group to weather this unprecedented
health crisis. Thanks to an adequate cash position, true to its
humanist culture and its commitments as a responsible employer, the
group continued its operating investments, controlled its costs,
while maintaining the basic salaries of its employees and
supporting its suppliers.
Hermès has donated €20 million to AP-HP
(Assistance Publique - Hôpitaux de Paris). This contribution
bolsters the donations of 50 tons of hand sanitizer produced by the
Perfumes site in Le Vaudreuil, and that of more than 120,000 masks.
The General Shareholders' Meeting approved in April 2020 the
payment of a dividend reduced from €5.00 to €4.55 per share, an
amount identical to that paid in 2019. Finally, the executive
chairmen have decided to waive the increases in their fixed
compensation paid in 2020 and their variable compensation awarded
in 2020 for 2019 and will therefore receive in 2020 a total amount
of compensation identical to that received in 2019.
The loyalty of our customers, the desirability
of our collections, the balance and agility of our network and the
independence of the group are the pillars that make us confident in
the future and that support our resumption of activity.
Highlights and post-closing events
In the first half of the year, Hermès
International redeemed 167,769 shares for €123 million, excluding
transactions completed within the framework of the liquidity
contract.
In July, as part of the strengthening of its
vertical integration strategy, Hermès acquired 100% of J3L,
specialising in metal parts dedicated to leather goods and fashion
accessories. Hermès previously held a 30% stake in the capital of
the group's long-standing supplier. This transaction, authorised by
French competition authorities, will have no significant impact on
the accounts.
Outlook
As of the date of this press release, almost all
of the group's stores have reopened, in compliance with strict
sanitary measures, even if the recovery in activity remains gradual
in several countries. The group is particularly pleased to welcome
its customers, loyal to the Saddler’s spirit.
For 2020, the impacts of the Covid-19 pandemic
remain difficult to assess today due to the developments that are
continuing in the various geographic areas. The craftsmanship model
implemented mostly in France, the balanced distribution network and
the local customer base are all factors that contribute to the
company's resilience. The group remains highly involved and
mobilised by adapting its systems to protect all its employees and
customers.
Thanks to its unique business model, Hermès is
pursuing its long-term development strategy based on creativity,
maintaining control over know-how and singular communication.
With pride in its artisanal model, in 2020
Hermès pays tribute to the extraordinary tool that is the hand, as
well as to the ingenuity that drives everyone of the house’s
craftsmen and women. For it is this combination that characterises
the innovative spirit of Hermès, its commitment to Innovation in
the making.
In the medium term, despite growing economic,
geopolitical and monetary uncertainties around the world, the Group
confirms an ambitious goal for revenue growth at constant exchange
rates.
Limited review procedures have been carried out
on the condensed interim consolidated financial statements by the
Statutory Auditors in accordance with applicable regulations.
The half-year financial report, the press release
and the presentation of the 2020 half-year results are available on
the group’s website: https://finance.hermes.com.
Upcoming events:
- 22 October 2020: Q3 2020 revenue publication
- 19 February 2021: 2020 full-year results publication
HERMÈS INTERNATIONAL –
Société en Commandite par Actions (SCA – partnership limited by
shares) with a capital of € 53,840,400.12Registered under number
572 076 396 RCS PARIS, with registered office at
24, rue du Faubourg Saint-Honoré 75008 PARIS FRANCE
FIRST HALF 2020 KEY FIGURES
| (In millions of
euros) |
H1 2020 |
FY 2019 |
H1 2019 |
|
Revenue |
2,488 |
6,883 |
3,284 |
| Growth
at current exchange rates vs. n-1 |
-24.2% |
15.4% |
15.1% |
| Growth
at constant exchange rates vs. n-1 (1) |
-24.9% |
12.4% |
12.0% |
|
Recurring operating income (2) |
535 |
2,339 |
1,144 |
| As a %
of revenue |
21.5% |
34.0% |
34.8% |
|
Operating income |
535 |
2,339 |
1,144 |
| As a %
of revenue |
21.5% |
34.0% |
34.8% |
| Net
profit – Group share |
335 |
1,528 |
754 |
| As a %
of revenue |
13.5% |
22.2% |
23.0% |
|
Operating cash flows |
634 |
2,063 |
971 |
|
Investments (excluding financial investments) |
162 |
478 |
170 |
|
Adjusted free cash flow (3) |
27 |
1,406 |
618 |
| Equity
– Group share |
6,340 |
6,568 |
5,763 |
| IFRS
net cash position (4) |
3,742 |
4,372 |
3,532 |
|
Restated net cash position (5) |
3,922 |
4,562 |
3,740 |
|
Workforce (number of employees) |
15,698 |
15,417 |
14,751 |
(1) Growth at constant exchange rates is
calculated by applying the average exchange rates of the previous
period to the current period's revenue, for each currency.
(2) Recurring operating income is one of
the main performance indicators monitored by the group's General
Management. It corresponds to the operating income excluding
non-recurring items having a significant impact likely to affect
the understanding of the group's economic performance.
(3) Adjusted free cash flow corresponds
to the sum of operating cash flows and change in working capital
requirement, less operating investments and repayment of lease
liabilities, as per IFRS cash flow statement.
(4) The IFRS net cash position includes
cash and cash equivalents, less bank overdrafts and short-term
debts. It doesn’t include liabilities related to the application of
IFRS 16.
(5) The restated net cash position
includes short-term investments that do not meet IFRS cash
equivalents criteria mainly because their original maturity exceeds
three months.
REVENUE BY GEOGRAPHICAL AREA 1
| |
|
First half |
Evolutions |
| In millions
of Euros |
|
2020 |
2019 |
Published |
At constant exchange rates |
| France |
|
252.2 |
405.8 |
(37.8)% |
(37.8)% |
| Europe (excl. France) |
|
348.9 |
544.6 |
(35.9)% |
(36.2)% |
| Total Europe |
|
601.2 |
950.4 |
(36.7)% |
(36.9)% |
| Japan |
|
322.2 |
400.6 |
(19.6)% |
(22.8)% |
| Asia-Pacific (excl. Japan) |
|
1,183.7 |
1,299.3 |
(8.9)% |
(9.1)% |
| Total Asia |
|
1,505.9 |
1,700.0 |
(11.4)% |
(12.3)% |
| Americas |
|
336.8 |
569.2 |
(40.8)% |
(41.7)% |
| Other |
|
44.1 |
64.6 |
(31.7)% |
(31.7)% |
| TOTAL |
|
2,488.0 |
3,284.2 |
(24.2)% |
(24.9)% |
| |
|
2nd quarter |
Evolutions |
| In millions
of Euros |
|
2020 |
2019 |
Published |
At constant exchange rates |
| France |
|
83.4 |
221.0 |
(62.3)% |
(62.3)% |
| Europe (excl. France) |
|
114.3 |
283.0 |
(59.6)% |
(59.4)% |
| Total Europe |
|
197.7 |
504.0 |
(60.8)% |
(60.7)% |
| Japan |
|
108.6 |
196.5 |
(44.7)% |
(47.5)% |
| Asia-Pacific (excl. Japan) |
|
582.9 |
643.4 |
(9.4)% |
(9.1)% |
| Total Asia |
|
691.5 |
839.9 |
(17.7)% |
(18.0)% |
| Americas |
|
78.3 |
299.6 |
(73.9)% |
(73.8)% |
| Other |
|
15.1 |
31.1 |
(51.4)% |
(51.4)% |
| TOTAL |
|
982.5 |
1,674.5 |
(41.3)% |
(41.5)% |
1 Sales by destination.
REVENUE BY sector
| |
|
First half |
Evolutions |
| In millions of
Euros |
|
2020 |
2019 |
Published |
At constant exchange rates |
| Leather Goods and Saddlery 1 |
|
1,280.1 |
1,652.4 |
(22.5)% |
(23.3)% |
| Ready-to-Wear and Accessories 2 |
|
537.0 |
754.6 |
(28.8)% |
(29.3)% |
| Silk and Textiles |
|
165.2 |
266.6 |
(38.0)% |
(38.5)% |
| Other Hermès sectors 3 |
|
239.2 |
247.6 |
(3.4)% |
(4.2)% |
| Perfumes |
|
112.9 |
158.7 |
(28.8)% |
(29.1)% |
| Watches |
|
74.2 |
90.5 |
(18.0)% |
(18.5)% |
| Other products 4 |
|
79.3 |
113.9 |
(30.4)% |
(30.8)% |
| TOTAL |
|
2,488.0 |
3,284.2 |
(24.2)% |
(24.9)% |
|
|
|
2nd quarter |
Evolutions |
| In millions
of Euros |
|
2020 |
2019 |
Published |
At constant exchange rates |
| Leather Goods and Saddlery 1 |
|
509.0 |
844.2 |
(39.7)% |
(40.0)% |
| Ready-to-Wear and Accessories 2 |
|
211.3 |
394.4 |
(46.4)% |
(46.3)% |
| Silk and Textiles |
|
50.2 |
126.2 |
(60.2)% |
(60.1)% |
| Other Hermès sectors 3 |
|
116.4 |
130.9 |
(11.1)% |
(11.4)% |
| Perfumes |
|
30.8 |
74.1 |
(58.4)% |
(58.5)% |
| Watches |
|
33.2 |
47.1 |
(29.5)% |
(29.4)% |
| Other products 4 |
|
31.6 |
57.7 |
(45.3)% |
(45.5)% |
| TOTAL |
|
982.5 |
1,674.5 |
(41.3)% |
(41.5)% |
1 The “Leather Goods and Saddlery” business line
includes bags, riding, diaries and small leather goods.2 The
“Ready-to-wear and Accessories” business line includes Hermès
Ready-to-wear for men and women, belts, costume jewellery, gloves,
hats and shoes.3 The “Other Hermès business lines” include
Jewellery and Hermès home products (Art of Living and Hermès
Tableware).4 The “Other products” include the production activities
carried out on behalf of non-group brands (textile printing,
tanning…), as well as the John Lobb, Saint-Louis, Puiforcat and
Shang Xia products.
REMINDER – FIRST QUARTER 2020
REVENUE BY GEOGRAPHICAL AREA 1
| |
|
1st quarter |
Evolutions |
| In millions
of Euros |
|
2020 |
2019 |
Published |
At constant exchange rates |
| France |
|
168.9 |
184.8 |
(8.6)% |
(8.6)% |
| Europe (excl. France) |
|
234.7 |
261.6 |
(10.3)% |
(11.0)% |
| Total Europe |
|
403.5 |
446.4 |
(9.6)% |
(10.0)% |
| Japan |
|
213.6 |
204.2 |
4.6% |
0.6% |
| Asia-Pacific (excl. Japan) |
|
600.9 |
655.9 |
(8.4)% |
(9.0)% |
| Total Asia |
|
814.5 |
860.1 |
(5.3)% |
(6.7)% |
| Americas |
|
258.5 |
269.7 |
(4.2)% |
(6.3)% |
| Other |
|
29.0 |
33.5 |
(13.4)% |
(13.5)% |
| TOTAL |
|
1,505.5 |
1,609.7 |
(6.5)% |
(7.7)% |
1 Sales by destination.
REVENUE BY SECTOR
| |
|
1st quarter |
Evolutions |
| In millions
of Euros |
|
2020 |
2019 |
Published |
At constant exchange rates |
| Leather Goods and Saddlery 1 |
|
771.1 |
808.2 |
(4.6)% |
(6.0)% |
| Ready-to-Wear and Accessories 2 |
|
325.8 |
360.2 |
(9.6)% |
(10.6)% |
| Silk and Textiles |
|
115.0 |
140.4 |
(18.1)% |
(19.2)% |
| Other Hermès sectors 3 |
|
122.9 |
116.7 |
5.3% |
3.9% |
| Perfumes |
|
82.1 |
84.6 |
(3.0)% |
(3.3)% |
| Watches |
|
41.0 |
43.4 |
(5.5)% |
(6.6)% |
| Other products 4 |
|
47.7 |
56.2 |
(15.1)% |
(15.8)% |
| TOTAL |
|
1,505.5 |
1,609.7 |
(6.5)% |
(7.7)% |
1 The “Leather Goods and Saddlery” business line
includes bags, riding, diaries and small leather goods.2 The
“Ready-to-wear and Accessories” business line includes Hermès
Ready-to-wear for men and women, belts, costume jewellery, gloves,
hats and shoes.3 The “Other Hermès business lines” include
Jewellery and Hermès home products (Art of Living and Hermès
Tableware).4 The “Other products” include the production activities
carried out on behalf of non-group brands (textile printing,
tanning…), as well as the John Lobb, Saint-Louis, Puiforcat and
Shang Xia products.
- CP 1H results 2020 - VA VDEF
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