Hermès has reported that its profitability likely narrowed in 2014 amid currency fluctuations and that revenue growth may slow in 2015, as well. According to Reuters, "the French luxury goods maker lowered its annual sales growth target for the first time in years to reflect its bigger size and overall industry downturn combined with potential hits from currency swings." The house's current operating margin was probably about 31 percent compared to the record 32.4 percent achieved in 2013, Paris-based Hermès said earlier this month in a statement. In November, the company said the measure may narrow “slightly.” Quarterly revenue rose to 1.22 billion euros ($1.38 billion) in the final three months of the year, just shy of 1.23 billion-euro median of analysts’ estimates.
Hermès, which last year remained one of the strongest performers of the European luxury goods sector, weathering slowing luxury growth better than many of its peers as high prices, limited supply and distribution help reinforce its elitist appeal. Sales excluding currency moves rose 9.6 percent in the fourth quarter, led by gains in its own stores, said the company, whose Birkin bags cost upwards of $10,000. Still, Hermès lowered its annual sales growth target to 8 percent from its traditional level of 10 percent. Chief Executive Axel Dumas said the house now needs to align its sales growth target with its size, having gone beyond the 4-billion euro mark for the first time in 2014, making it bigger than Gucci. "There are also currency and geopolitical issues which encourage us to be prudent," Dumas said. "We have a complex Chinese market, tensions in Europe."
Revenue for Hermès rose 9.6 percent in the fourth quarter of 2014 and 11.1 percent overall in 2014 at constant exchange rates. In contrast, sales at the fashion and leather goods division of industry leader LVMH Moet Hennessy Louis Vuitton, which includes brands Louis Vuitton, Celine, Dior and Fendi, rose only 3 percent last year. Smaller rival Salvatore Ferragamo saw its revenues rise 6.5 percent at constant currencies last year, whereas Italian rival Prada reported that revenue fell 1 percent to 3.55 billion euros ($4 billion) in the 12 months through January 2015.
According to Reuters, Hermès saw revenues in the last quarter jump 15.5 percent in the Americas, providing further evidence the United States had replaced China as the luxury industry's most buoyant market. Part of the boost has come from the strong inflow of Chinese tourists and students in the United States, helped by visa procedures eased by the Obama administration. Hermès also enjoyed strong growth in Japan, a market in which it has continued to invest over the years, with fourth-quarter sales up 12.6 percent at constant exchange rates. The United States and Japan were also the strongest growing markets for LVMH.
Many luxury brands have been hit by weaker demand from the Russians and the Chinese, particularly in Hong Kong, where some labels make more than 10 percent of their sales, as protests spooked visitors.