After raising its prices in yen on the Japanese market in the previous three years, Hermès dared to boost them again by 6-7 percent in 2007. Thanks to strong demand for the brand, its sales in Japan grew nevertheless by a further 3 percent in local currencies last year, but translated into euros, they fell by 10 percent. Also in the USA, Hermès charged 9 percent more in dollars, yet its sales there jumped by 14 percent.
Addressing mainly customers who care only partially about prices, Hermès decided to raise them to protect its high profit margins in two countries that are important for its overall business. Japan is its largest market and the USA is the fourth- largest one, behind Europe (outside France) and the French market. Thus, the group’s operating profit grew by 14.4 percent in local currencies and by 3.4 percent in euros to reach €414.5 million for the year.
Hermès’ net income increased at a stronger rate of 7.4 percent in euros to €288 million, or 17.7 percent of sales, but it would have risen by 18.2 percent if currency exchange rates had remained the same. Two positive factors for this increase were improved interest income and an extraordinary gain of €9.2 million from the sale of its residual interest in Leica.
As previously reported, the company’s consolidated sales went up by 7.3 percent last year and reached €1.62 billion, thanks to a rebound in the second half, with a 12.5 percent increase on a currency-neutral basis. They were particularly strong in Switzerland, England, Russia and other European countries outside France, were they grew overall by 14 percent. Sales doubled in China.
The company invested €156 million in the course of the year to expand or renovate its store network and to boost its production capacities, hiring a total of 630 new persons. Hermès plans to open or renovate some 40 stores in 2008. It will inaugurate its first store in India, situated in New Delhi, next Fall.
The management is budgeting a sales increase of 10-11 percent this year in terms of local currencies.