Record US$1.1 billion profit for Hermes
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French luxury goods brand Hermes made a record net profit last year of €1.1 billion (US$1.19 billion), doing “better than we expected”, according to CEO Axel Dumas.
“We are entering this year on a solid base, but remain cautious in view of an uncertain environment.”
Known for its $10,000 Birkin bags and $400 printed silk scarves, Hermes says its net profits rose by 13 per cent while its operating margin hit an historic high of 32.6 per cent of sales against 31.8 per cent in 2015.
Its sales growth mainly stemmed from the strong performance of its leather goods, which accounts for half of group sales. Other divisions also performed well with the exception of its watches unit.
Hermes joined other luxury companies such as Kering and LVMH in reporting an improvement in the luxury goods sector, which has been hit by slowing demand in China as well as terrorist attacks in France deterring tourism in Europe.
Questions & Answers
Q.What contributed most to Hermes' sales growth last year?
What contributed most to Hermes' sales growth last year?
The company's sales growth primarily resulted from the strong performance of its leather goods division. This category alone accounted for half of the total group sales, significantly boosting overall figures.
Q.What is the operating margin that Hermes achieved last year?
What is the operating margin that Hermes achieved last year?
Hermes reported an historic high operating margin of 32.6 per cent of its sales last year. This figure represents an increase from the 31.8 per cent achieved in 2015, showing improved efficiency.
Q.Which of Hermes' product categories did not perform well last year?
Which of Hermes' product categories did not perform well last year?
While most of Hermes' divisions performed well, the company's watches unit was an exception. The article states that other divisions performed well, with the watches unit being the sole area of underperformance.
Q.What external factors have impacted the luxury goods sector recently?
What external factors have impacted the luxury goods sector recently?
The luxury goods sector has been affected by slowing consumer demand in China, which has reduced sales. Also, terrorist attacks in France have deterred tourism in Europe, impacting luxury sales in the region.
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