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Hermès announces 2020 annual results

Recently, Hermès announced its 2020 annual results, which overall exceeded expectations, thanks to the increase in sales in China and other Asian markets at the end of 2020. Hermes‘ 2020 financial report shows that the full-year revenue, excluding exchange rate changes, fell by 6% to 6.4 billion euros ($7.8 billion). Sales in the fourth quarter rebounded strongly, with a year-on-year increase of 16%. After the release of the financial report, Hermès’ stock price soared more than 5% in one fell swoop, breaking through the 100 billion euro market value mark and setting a record high.

The strong performance in the fourth quarter far exceeded analysts’ expectations and was almost equal to LVMH’s best-performing fashion leather department, which included top-tier luxury goods such as Louis Vuitton and Dior, which rose 18% in the fourth quarter.

The Hermes financial report said that it was mainly due to the contributions of Greater China, South Korea and Australia. Sales revenue in the Asian market (46%) except Japan increased by 14% year-on-year, with a 47% increase in the fourth quarter.

Last year Hermes benefited from the strong growth of the Chinese economy. Due to the interruption of overseas travel due to the epidemic, Chinese consumers snapped up Hermès colorful silk scarves, Birkin bags and Kelly bags in the domestic market. In fact, as early as the Hermes Guangzhou two-in-one store opened in early April last year, the day when Taikoo Hui reopened, it attracted surrounding brand users to rush to buy. The industry rumored that the turnover on that day was at least US$2.7 million, equivalent to 19 million yuan, breaking the single store day in China. Sales records.


“Paradise Toucan” Silk Twill Scarf

Hermes products on the second-hand market are also more immune to crisis than competing brands. Max Bittner, CEO of French luxury goods monopoly website Vestiaire Collective, revealed that under the epidemic, Hermès and Chanel transactions are still active and prices are firm. Hermès’ most valuable Birkin and Kelly series have always been in short supply and have long been regarded as investment tools.

Axel Dumas, Executive Chairman of the Hermès Group, said: “The steady performance of the annual performance reflects the attractiveness of Hermès products to customers, and also confirms the resilience of the business model based on craftsmanship in the special context of the epidemic.”

It is worth noting that due to the restrictions of the epidemic lockdown policy, stores in many countries in Europe are closed. Sales revenue in the French market (10%) fell by 29% year-on-year, and sales revenue in European markets other than France (15%) fell by 20% year-on-year.

However, Hermès once again emphasized that in terms of production, it insists on integrated operations in France. In 2021 and 2022, Hermès’ two workshops in Guyenne and Montereau and Louviers’ workshops will start operations one after another. At the same time, a new workshop in the Ardennes is scheduled to be put into use in 2023, and a second workshop project on the site has also been announced.

On the other hand, under the epidemic, the passenger flow of physical stores has declined sharply. The Hermes Group flexibly adopted multi-channel solutions. Online sales in all markets have been successful. The development of digital platforms in the Asian and Middle Eastern markets has achieved remarkable results.

Chief Financial Officer Eric du Halgouet revealed in the previous conference call that the official website has become the largest “store” of Hermès. The sales in the first nine months of last year increased by nearly 100%, exceeding the sales of any major store of the brand. In the future, the group Will continue to increase the proportion of online revenue, but still does not include iconic products such as platinum bags.

The effects of digitization are also traceable. The sudden outbreak of the epidemic in 2020 hit physical retail, and online sales have gradually become the highlight of Hermès’ financial report. In the third quarter of fiscal 2020, Hermes’ online sales achieved triple-digit growth in all regions.

Following the launch of e-commerce shopping on the official website in 2018, the official flagship store of Hermès officially opened on Tmall at the beginning of the year. Although perfume only accounts for 4% of the group’s sales revenue, it is clear that this move is a pathfinder for Hermes to enter the third-party e-commerce platform on a large scale. According to store information, the store’s opening time is March 30, 2020. Hermes, which is very conservative in marketing and e-commerce channels, wait and see and prepare for nearly a year before opening. There should be more consideration behind it.

Official flagship store of Hermes perfume

The CEO of Hermes, Axel Dumas, expressed his intention to cooperate with third-party e-commerce platforms such as Tmall luxury goods as early as 2018, “but it must be discussed carefully. We must have strict control over product selection, display, and pricing.” .

Looking forward to the 2021 fiscal year, the Hermès Group’s financial report pointed out that it is confident in the growth of mid-term sales revenue (at constant exchange rates), but the short-term prospects are still unclear. It said, “subject to the uncertainty of the epidemic, it is difficult to predict the performance guidance for the 2021 fiscal year.”

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