• Hermès International: 2023 Half-year Results

    Source: Nasdaq GlobeNewswire / 28 Jul 2023 01:00:00   America/Chicago

                                            

    Half-year information report as at the end of June 2023

    Outstanding performance in sales and results in the first half

    Revenue increased by 25% at constant rates and by 22% at current rates
    Recurring operating income reached €2,947 million (i.e. 44% of sales)
    Net income amounted to €2,226 million, an increase of 36%

    Paris, 28 July 2023

    The group’s consolidated revenue in the first half of 2023 amounted to €6,698 million, up 25% at constant exchange rates and 22% at current exchange rates compared to the same period in 2022. Recurring operating income reached €2,947 million (44% of sales) and net income (group share) €2,226 million (33% of sales).

    In the second quarter, sales reached €3,317 million, increasing by 28% at constant exchange rates and by 22% at current exchange rates, with a strong momentum across all business lines and all regions.

    Axel Dumas, Executive Chairman of Hermès, said: “The 2023 first half results reflect the strength of the pillars of the artisanal model of the house: quality of materials, exceptional know-how and abundant creativity. To support this growth, we continue to invest in our production capacities, in the expansion of our network, while accelerating job creation and training in all of the group’s métiers.”

    Sales by geographical area at the end of June
    (at comparable exchange rates, unless otherwise indicated)

    At the end of June 2023, all the regions posted strong growth of 20% or above, with an exceptional growth in Asia, supported by a favourable comparison basis in the 2nd quarter. Sales increased significantly both in group stores (+25% at constant exchange rates) and in wholesale activities (+26%), which benefitted from the rebound in travel retail. Hermès continued to develop its exclusive distribution network.

    • Asia excluding Japan (+28%), after a successful Chinese New Year, continued its strong momentum in Greater China and throughout the region, particularly in Singapore, Thailand, Australia and Korea. The second quarter benefitted from a favourable comparison basis year on year, due to the health measures taken in China in April and May 2022. The Peninsula store, the house’s first address in Beijing in 1997, reopened in April after renovation and extension.

    • Japan (+26%), thanks notably to its local clients, achieved a remarkable performance. The Fukuoka Hakata Hankyu store reopened in May after renovation.

    • The Americas (+20%) continued their sustained growth in the second quarter. In the United States, a new store opened in Aspen, Colorado, in June, after the one in Naples in the Gulf of Mexico in February. The Le monde d’Hermès kiosk, an invitation to immerse into the universe of the house, stopped off in Austin in May.

    • Europe excluding France (+22%) and France (+24%) pursued their strong growth, thanks to the loyalty of local customers and dynamic tourist flows. The store in Hamburg reopened in April after being renovated and extended.

    Sales by business line at the end of June
    (at comparable exchange rates, unless otherwise indicated)

    At the end of June 2023, all the business lines confirmed their solid momentum, underlying the tremendous attractiveness of the house.

    The Leather Goods and Saddlery (+21%) recorded exceptional growth, benefitting from sustained demand and a favourable comparison basis in the 2nd quarter, notably in Greater China. Two new leather goods production workshops were inaugurated in Louviers (Normandy) in April and in la Sormonne (Ardennes) in May. The leather goods and glove-making workshop in Saint-Junien has been relocated to a new, larger site by the Vienne river. Four new leather goods production sites will be rolled out the next four years, in Riom (Puy-de-Dôme) in 2024, L’Isle-d’Espagnac (Charente) in 2025, Loupes (Gironde) in 2026 and Charleville-Mézières (Ardennes) scheduled for 2027. Hermès thus continues to strengthen its local anchoring in France and to create jobs. The collections have been enriched with new models, including In-The-Loop, Maximors, Birkin Picnic and Hacados, and enhanced savoir-faire such as hand painting, wickerwork, marquetry and embroidery.

    The Ready-to-Wear and Accessories division (+35%) pursued its dynamic growth, driven by the success of the ready-to-wear collections, fashion accessories and shoes. The men’s spring-summer 2024 fashion show unveiled at the palais d’Iéna in June was very well received. Fashion accessories and shoes are enjoying a strong demand, with models showcasing know-how and innovation.

    The Silk and Textiles business line (+22%) recorded solid growth, supported by exceptional materials and the expansion of production capacities at the Pierre-Bénite site near Lyon, inaugurated in July. After Dubai in the first quarter, scarves transformed into kites once again and spread their patterns at the Kite Festival in Busan, South Korea, in June.

    Perfume and Beauty (+10%) continued their development. A new Eau de toilette, Un Jardin à Cythère, the 7th creation in the Jardin collection, was unveiled in February. Hermès launched a new limited edition of Rouge Hermès ahead of the arrival this autumn of the fifth chapter of Beauty around the eyes.

    The Watches business line (+24%) confirmed its excellent performance, based on exceptional creativity, style and remarkable watch-making savoir-faire, both for the complication models and the house’s classic models. The H08 line, which welcomed a new carbon fibre chronograph version this year, is meeting with great success.

    The Other Hermès business lines (+32%) pursued their strong growth, highlighting the full singularity and creative strength of the house, with for example the Chaîne d’ancre jewel new creations presented in July at the Faubourg Saint-Honoré in Paris. Home universe collections were presented in April at the latest Milan Design Week.

    Outstanding results in H1 2023

    Recurring operating income increased by 28% to €2,947 million compared to €2,304 million in H1 2022. Thanks to the leverage effect generated by strong sales growth and the positive currency impact, the recurring operating profitability reached 44%, compared to 42% at the end of June 2022.

    Consolidated net profit (group share) amounted to €2,226 million (33% of sales) compared to €1,641 million in H1 2022, an increase of 36% thanks notably to improved cash remuneration conditions.

    The cash flow related to operating activities amounted to €2,106 million, compared to €1,740 million in the first half of 2022. After operational investments (€249 million) and repayment of lease liabilities (€137 million), the adjusted free cash flow reached €1,720 million.

    After distribution of the ordinary dividend (€1,359 million), the restated net cash position amounted to €9,848 million at 30 June 2023.

    A responsible, sustainable model

    In line with its commitments as a responsible employer, the Hermès group continued to recruit and increased its workforce by more than 900 people, including more than 500 in France, in the first half. At the end of June 2023, the Group employed 20,607 people, including 12,875 in France.

    In order to involve all employees in its development and successes, the group announced in June the 6th free share plan which will enable all employees worldwide to become shareholders.

    Committed to the excellence and transmission of our know-how, the house continues to develop internal training programmes. The École Hermès des Savoir-Faire has rolled out its Vocational Training Center (CFA), which delivers the CAP Maroquinier, at the Guyenne (Gironde) site and has launched a new certifying training course for the profession of cutter.

    The house continues to promote inclusion and diversity, and has 6.85% of employees with disabilities in France.

    The leather goods production sites of Louviers and la Sormonne inaugurated this semester are today the first two industrial buildings in France to be E4C2 certified, a label which assesses environmental performance according to energy consumption and carbon emissions. They reflect the responsible construction standard developed by the house, which is particularly demanding in terms of carbon footprint, air quality, local sourcing, biodiversity and environmental health, thus contributing to our objective of halving the carbon footprint per square metre built by 2030, compared to 2018.

    Finally, on 28 June 2023, the Hermès Group received the Grand Prix CAC Large 60 Transparency Award for the quality of regulated information.

    Outlook

    The group continues the year 2023 with confidence, thanks to the highly integrated artisanal model, the balanced distribution network, the creativity of collections and the loyalty of clients.

    In the medium-term, despite the economic, geopolitical and monetary uncertainties around the world, the Group confirms an ambitious goal for revenue growth at constant exchange rates.

    Thanks to its unique business model, Hermès is pursuing its long-term development strategy based on creativity, maintaining control over know-how and singular communication.

    Inspiration of the creation at Hermès, Astonishment is the theme of the year. The ability to be surprised is a constant source of innovation and dynamism for the house, which will continue to accompany clients with enthusiasm and creativity across 2023.

    Limited review procedures have been carried out on the condensed interim consolidated financial statements by the Statutory Auditors in accordance with applicable regulations.

    The half-year financial report, the press release and the presentation of the 2023 half year results are available on the group's website: https://finance.hermes.com

    Upcoming events:

    • 24 October 2023: Q3 2023 revenue publication
    • 9 February 2024: 2023 full-year results publication
    • 25 April 2024: Q1 2024 revenue publication
    • 30 April 2024: General Meeting of shareholders

    FIRST HALF 2023 KEY FIGURES

    In millions of eurosH1 20232022H1 2022
        
    Revenue6,69811,6025,475
    Growth at current exchange rates vs. n-122.3%29.2%29.3%
    Growth at constant exchange rates vs. n-1 (1)25.2%23.4%23.2%
        
    Recurring operating income (2)2,9474,6972,304
    As a % of revenue44.0%40.5%42.1%
        
    Operating income2,9474,6972,304
    As a % of revenue44.0%40.5%42.1%
        
    Net profit – Group share2,2263,3671,641
    As a % of revenue33.2%29.0%30.0%
        
    Operating cash flows2,6154,1112,001
        
    Investments (excluding financial investments)249518190
        
    Adjusted free cash flow (3)1,7203,4051,421
        
    Equity – Group share13,24912,44010,259
        
    Net cash position (4)9,3269,2237,280
        
    Restated net cash position (5)9,8489,7427,685
        
    Workforce (number of employees)20,60719,68618,428

    (1)   Growth at constant exchange rates is calculated by applying the average exchange rates of the previous period to the current period's revenue, for each currency.

    (2)   Recurring operating income is one of the main performance indicators monitored by the group's General Management. It corresponds to the operating income excluding non-recurring items having a significant impact likely to affect the understanding of the group's economic performance.

    (3)   Adjusted free cash flow corresponds to the sum of operating cash flows and change in working capital requirement, less operating investments and repayment of lease liabilities, as per IFRS cash flow statement.

    (4)           The net cash position includes cash and cash equivalents on the asset side of the balance sheet, less bank overdrafts presented within the short-term borrowings and financial liabilities on the liability side of the balance sheet. It does not include lease liabilities recognised in accordance with IFRS 16.

    (5)           The restated net cash position corresponds to the net cash position, plus cash investments that do not meet IFRS criteria for cash equivalents as a result of their original maturity of more than three months, minus borrowings and financial liabilities.

    REVENUE BY GEOGRAPHICAL AREA (a)

      First halfEvolution /2022
    In millions of Euros 20232022PublishedAt constant exchange rates
    France 59348023.5 %23.5 %
    Europe (excl. France) 83669620.0 %21.5 %
    Total Europe 1,4281,17621.4 %22.3 %
    Japan 63654616.4 %26.0 %
    Asia-Pacific (excl. Japan) 3,2972,66523.7 %27.6 %
    Total Asia 3,9323,21122.5 %27.3 %
    Americas 1,18598220.7 %19.9 %
    Other 15110643.0 %42.4 %
    TOTAL 6,6985,47522.3 %25.2 %


      2nd quarterEvolution /2022
    In millions of Euros 20232022PublishedAt constant exchange rates
    France 32026620.1 %20.1 %
    Europe (excl. France) 44436920.3 %22.1 %
    Total Europe 76463620.2 %21.3 %
    Japan 31426916.7 %25.9 %
    Asia-Pacific (excl. Japan) 1,5341,21826.0 %33.7 %
    Total Asia 1,8481,48724.3 %32.3 %
    Americas 62953318.0 %20.5 %
    Other 775538.8 %38.2 %
    TOTAL 3,3172,71022.4 %27.5 %

    (a) Sales by destination.


    REVENUE BY SECTOR

      First halfEvolution /2022
    In millions of Euros 20232022PublishedAt constant exchange rates
    Leather Goods and Saddlery (1) 2,7802,35817.9 %20.8 %
    Ready-to-wear and Accessories (2) 1,9221,45831.8 %34.8 %
    Silk and Textiles 44437219.4 %22.4 %
    Other Hermès sectors (3) 83664829.0 %32.1 %
    Perfume and Beauty 2492308.3 %9.5 %
    Watches 31726221.0 %24.3 %
    Other products (4) 1501462.2 %4.1 %
    TOTAL 6,6985,47522.3 %25.2 %


      2nd quarterEvolution /2022
    In millions of Euros 20232022PublishedAt constant exchange rates
    Leather Goods and Saddlery (1) 1,3711,16218.0 %23.2 %
    Ready-to-wear and Accessories (2) 97274829.9 %35.1 %
    Silk and Textiles 20917420.5 %25.8 %
    Other Hermès sectors (3) 41531830.3 %36.1 %
    Perfume and Beauty 12311110.7 %12.4 %
    Watches 15212818.3 %24.2 %
    Other products (4) 75699.3 %12.3 %
    TOTAL 3,3172,71022.4 %27.5 %

    (1) The “Leather Goods and Saddlery” business line includes bags, riding, memory holders and small leather goods.
    (2) The “Ready-to-wear and Accessories” business line includes Hermès Ready-to-wear for men and women, belts, costume jewellery, gloves, hats and shoes.
    (3) The “Other Hermès business lines” include Jewellery and Hermès home products (Art of Living and Hermès Tableware).
    (4) The “Other products” include the production activities carried out on behalf of non-group brands (textile printing, tanning…), as well as John Lobb, Saint-Louis and Puiforcat.

    REMINDER – 1ST QUARTER 2023

    REVENUE BY GEOGRAPHICAL ZONE (a)

      1st quarterEvolution /2022
    In millions of Euros 20232022PublishedAt constant exchange rates
    France 27321427.7%27.7%
    Europe (excl. France) 39132719.7%21.3%
    Total Europe 66454122.9%23.9%
    Japan 32227716.1%26.1%
    Asia-Pacific (excl. Japan) 1,7631,44721.8%22.5%
    Total Asia 2,0841,72420.9%23.0%
    Americas 55644923.9%19.2%
    Other 755147.6%46.9%
    TOTAL 3,3802,76522.3%23.0%

    (a) Sales by destination.

    REVENUE BY SECTOR

      1st quarterEvolution /2022
    In millions of Euros  20232022PublishedAt constant exchange rates
    Leather Goods and Saddlery (1) 1,4091,19717.8%18.5%
    Ready-to-wear and Accessories (2) 95071033.7%34.4%
    Silk and Textiles 23419818.4%19.6%
    Other Hermès sectors (3) 42133027.7%28.3%
    Perfume and Beauty 1261196.1%6.8%
    Watches 16613423.6%24.6%
    Other products (4) 7477(4.0)%(3.2)%
    TOTAL 3,3802,76522.3%23.0%

    (1) The “Leather Goods and Saddlery” business line includes bags, riding, memory holders and small leather goods.
    (2) The “Ready-to-wear and Accessories” business line includes Hermès Ready-to-wear for men and women, belts, costume jewellery, gloves, hats and shoes.
    (3) The “Other Hermès business lines” include Jewellery and Hermès home products (Art of Living and Hermès Tableware).
    (4) The “Other products” include the production activities carried out on behalf of non-group brands (textile printing, tanning…), as well as John Lobb, Saint-Louis and Puiforcat.

    APPENDIX – EXTRACT FROM FIRST HALF CONSOLIDATED ACCOUNTS

    CONSOLIDATED INCOME STATEMENT

    In millions of eurosH1 2023Financial year 2022H1 2022
    Revenue6,698 11,602 5,475
    Cost of sales(1,863)(3,389)(1,586)
    Gross margin4,834 8,213 3,889
    Sales and administrative expenses(1,485)(2,680)(1,178)
    Other income and expenses(403)(836)(406)
    Recurring operating income2,947 4,697 2,304
    Other non-recurring income and expenses---
    Operating income2,947 4,697 2,304
    Net financial income75 (62)(35)
    Net income before tax3,021 4,635 2,270
    Income tax(831)(1,305)(647)
    Net income from associates43 50 25
    CONSOLIDATED NET INCOME2,234 3,380 1,647
    Non-controlling interests(8)(13)(6)
    NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT2,226 3,367 1,641
    Basic earnings per share (in euros)21.29 32.2015.69
    Diluted earnings per share (in euros)21.26 32.0915.64


    In millions of eurosH1 2023Financial year 2022H1 2022 
    Consolidated net income2,234 3,380 1,647  
    Changes in foreign currency adjustments 1(115)126 182  
    Hedges of future cash flows in foreign currencies 1 272129 10  
    • change in fair value
    		123 23 (97) 
    • recycling through profit or loss
    		(51)106 107  
    Assets at fair value 2-333 - 
    Employee benefit obligations: change in value linked to actuarial gains and losses 2(1)41 1  
    Net comprehensive income2,189 4,009 1,840  
    • attributable to owners of the parent
    		2,180 3,996 1,833  
    • attributable to non-controlling interests
    		9 14 7  
    (1) Transferable through profit or loss.
    (2) Net of tax.

    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

    CONSOLIDATED BALANCE SHEET

    ASSETS

    In millions of euros30/06/202331/12/202230/06/2022
    Goodwill--14
    Intangible assets217 213 204
    Right-of-use assets1,624 1,582 1,665
    Property, plant and equipment2,018 2,007 1,916
    Investment property8 8 8
    Financial assets1,121 1,109 648
    Investments in associates58 54 52
    Loans and deposits65 65 63
    Deferred tax assets581 555 636
    Other non-current assets45 39 25
    Non-current assets5,737 5,630 5,232
    Inventories and work-in-progress2,081 1,779 1,617
    Trade and other receivables415 383 464
    Current tax receivables16 19 8
    Other current assets353 263 288
    Financial derivatives303 160 179
    Cash and cash equivalents9,349 9,225 7,293
    Current assets12,518 11,828 9,850
    TOTAL ASSETS18,255 17,459 15,082

    LIABILITIES

    In millions of euros30/06/202331/12/202230/06/2022
    Share capital54 54 54
    Share premium50 50 50
    Treasury shares(670)(674)(672)
    Reserves10,785 8,795 8,735
    Foreign currency adjustments188 303 359
    Revaluation adjustments617 546 93
    Net income attributable to owners of the parent2,226 3,367 1,641
    Equity attributable to owners of the parent13,249 12,440 10,259
    Non-controlling interests(5)16 14
    Equity13,244 12,457 10,273
    Borrowings and financial liabilities due in more than one year35 35 24
    Lease liabilities due in more than one year1,646 1,629 1,705
    Non-current provisions28 30 29
    Post-employment and other employee benefit obligations due in more than one year186 181 224
    Deferred tax liabilities4 20 46
    Other non-current liabilities118 103 48
    Non-current liabilities2,017 1,998 2,076
    Borrowings and financial liabilities due in less than one year23 2 14
    Lease liabilities due in less than one year284 268 272
    Current provisions130 133 129
    Post-employment and other employee benefit obligations due in less than one year15 15 40
    Trade and other payables699 777 536
    Financial derivatives80 74 213
    Current tax liabilities647 496 468
    Other current liabilities1,115 1,239 1,063
    Current liabilities2,994 3,004 2,733
    TOTAL EQUITY AND LIABILITIES18,255 17,459 15,082

    CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

    In millions of euros

         		Number of shares

         		Share capital

         		Share premium

         		Treasury shares

         		Consolidated reserves and net income attributable to owners of the parent

         		Actuarial gains and losses

         		Foreign currency adjustments

         		Revaluation adjustments   
    Financial investmentsHedges of future cash flows in foreign currenciesEquity attributable to owners of the parentNon- controlling interestsEquity
    As at 1 January 2022105,569,412 54 50 (551)9,712 (125)178 188 (105)9,400 12 9,412
    Net income for the first half of 2022----1,641--- 1,64161,647
    Other comprehensive income for the first half of 2022-----1181-101911193
    Comprehensive income for the first half of 2022----1,6411181-101,83371,840
    Change in share capital and share premiums------------
    Purchase or sale of treasury shares---(120)(0)----(120)-(120)
    Share-based payments----27----27-27
    Dividends paid----(845)----(845)(6)(850)
    Other--- (36)----(36)-(36)
    AS AT 30 JUNE 2022105,569,412 54 50 (672)10,500 (124)359 188 (95)10,259 14 10,273
    Net income for the second half of 2022----1,726----1,72661,732
    Other comprehensive income for the second half of 2022-----39(55)333120437(0)437
    Comprehensive income for the second half of 2022----1,72639(55)3331202,16362,169
    Change in share capital and share premiums------------
    Purchase or sale of treasury shares---(3)2----(1)-(1)
    Share-based payments----27----27-27
    Dividends paid---------(0)(2)(2)
    Other--- (8)----(8)(2)(10)
    As at 31 December 2022105,569,412 54 50 (674)12,247 (85)303 521 25 12,440 16 12,457
    Net income for the first half of 2023----2,226----2,22682,234
    Other comprehensive income for the first half of 2023-----(1)(116)-72(45)1(45)
    Comprehensive income for the first half of 2023----2,226(1)(116)-722,18092,189
    Change in share capital and share premiums------------
    Purchase or sale of treasury shares---41----5-5
    Share-based payments----30----30-30
    Dividends paid----(1,376)----(1,376)(8)(1,384)
    Other----(31)----(31)(22)(53)
    AS AT 30 JUNE 2023105,569,412 54 50 (670)13,097 (86)188 521 96 13,249 (5)13,244

    CONSOLIDATED STATEMENT OF CASH FLOWS

    In millions of eurosH1 2023Financial year 2022H1 2022
    CASH FLOWS RELATED TO OPERATING ACTIVITIES   
    Net income attributable to owners of the parent2,2263,3671,641
    Depreciation and amortisation of fixed assets183341160
    Amortisation of right-of-use assets139266127
    Impairment losses2212371
    Foreign exchange gains/(losses) on fair value adjustments6212(24)
    Change in provisions261222
    Net income from associates(43)(50)(25)
    Net income attributable to non-controlling interests8136
    Capital gains or losses on disposals and impact of changes in scope of consolidation0(1)7
    Deferred income tax expense(25)(16)(1)
    Accrued expenses and income related to share-based payments305527
    Dividend income(12)(11)(11)
    Operating cash flows2,6154,1112,001
    Change in working capital requirements(509)73(261)
    Change in net cash position related to operating activities (A)2,1064,1841,740
    CASH FLOWS RELATED TO INVESTING ACTIVITIES   
    Operating investments(249)(518)(190)
    Acquisitions of consolidated shares(73)(1)-
    Acquisitions of other financial assets(24)(165)(40)
    Disposals of operating assets010
    Disposals of consolidated shares and impact of losses of control-0-
    Disposals of other financial assets-55
    Change in payables and receivables related to investing activities(12)32(18)
    Dividends received266736
    Change in net cash position related to investing activities (B)(333)(579)(207)
    CASH FLOWS RELATED TO FINANCING ACTIVITIES   
    Dividends paid(1,384)(852)(850)
    Repayment of lease liabilities(137)(261)(128)
    Treasury share buybacks net of disposals4(123)(120)
    Borrowing subscriptions0--
    Repayment of borrowings(0)(0)(0)
    Change in net cash position related to financing activities (C)(1,517)(1,237)(1,099)
    Foreign currency translation adjustment (D)(153)159151
    CHANGE IN NET CASH POSITION (A) + (B) + (C) + (D)1032,528585
    Net cash position at the beginning of the period9,2236,6956,695
    Net cash position at the end of the period9,3269,2237,280
    CHANGE IN NET CASH POSITION1032,528585

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