While most luxury retailers are struggling for growth, French luxury goods maker Hermès posted a 7 percent rise in full-year operating income and announced a dividend hike, as well as a one-time additional payment to investors. Operating profit totaled 1.3 billion euros ($1.42 billion), Hermès said in a statement, while its operating margin slipped to 31.5 percent of sales from 32.4 percent a year earlier, because of hedging effects related to the yen. Hermès said it would pay a dividend of 2.95 euros a share, up from 2.70 euros a year ago, as well as an exceptional dividend of 5 euros a share. Additionally, the Birkin bag maker reported that its full-year sales surged notably in North America, where they were up 14.5 percent, and Asia, where they rose 13 percent, despite a slowdown in China. European sales were up 7 percent.
Nevertheless, Hermès, citing "economic, geopolitical and monetary uncertainties around the world", set a lower turnover target for this year. The group lowered its annual sales growth target from its traditional level of 10 percent when it announced quarterly sales last month, to reflect its bigger size and an overall industry downturn combined with potential hits from currency swings. "Hermès will continue its long-term development strategy based on creativity and maintaining control over its know-how," the group said in a statement. Hermès said then that its operating margin for 2014 would be "in the region of 31 percent."
Hermès is now bigger than rival Gucci in terms of sales after annual revenue went beyond the 4 billion euro mark for the first time in 2014. While Gucci is the most profitable brand for French luxury conglomerate, Kering, the Florentine brand is still struggling to bounce back from the logo-fatigue that consumers began to experience several years ago. Big brands, like Gucci, have also been suffering from consumers' growing appetite for smaller, less widely distributed labels, particularly in key markets such as China, which was the luxury goods industry's main growth engine until 2012.
Gucci, Burberry and Louis Vuitton, have all worked hard in the past three to five years to rebuild the aura of exclusivity they lost by going too mass market and milking the label too hard in the mid to late 2000s. The volume-based strategy made shareholders rich but also diluted the brand. While Louis Vuitton has, as sales figures indicate, bounced back quite successfully, Gucci is having a much more difficult time. Gucci's sales were steadily declining in 2014, while Louis Vuitton's revenues are still growing, albeit in low single digits, and Hermes -- which always kept volumes under control -- together with Burberry, are still enjoying fairly significant sales growth.