Hermès announced first-half results of 2020 with revenues down -24% at current exchange rates and -25% at constant exchange rates, recurring operating profitability reached 21.5% of sales.
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 US$2,933 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 US$60 million (21.5% of sales) at the end of June. Net income reached US$394 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.”
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.
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 hydroalcoholic 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.
In the first half of the year, Hermès International redeemed 167,769 shares for US$145 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.