Hermès International: 2022 Full Year Results

HERMES
2022 Full Year Results

Sales momentum and particularly robust results in 2022

Revenue amounted to €11.6 billion
(+29% at current exchange rates and +23% at constant exchange rates)
Recurring operating income reached €4.7 billion (+33%)
Net profit amounted to €3.4 billion (+38%)

Paris, 17^th February 2023

The group’s consolidated revenue amounted to €11,602 million in 2022, up 29% at current exchange rates and 23% at constant exchange rates compared to 2021. Recurring operating income amounted to €4,697 million, i.e. 40.5% of sales. Net profit (group share) reached €3,367 million, representing net profitability of 29%.

In the fourth quarter 2022, the great sales momentum recorded at the end of September continued, with sales reaching €2,991 million, an increase of 26% at current exchanges rates and 23% at constant exchange rates.

Axel Dumas, Executive Chairman of Hermès, said: "In 2022, Hermès had an exceptional year thanks notably to the good performance of its international markets. This success reinforces our approach as an artisanal and highly integrated company, mainly in France: a design house that offers objects conceived to be functional, with an assertive style and uncompromising quality. The year underpins the relevance of our responsible and sustainable model.”

Over the last three years, Hermès created 4,300 jobs, including 2,900 in France, and reinforced its operating investments by €1.5 billion, including c. 60% in France.

Sales by geographical area at the end of December
(at constant exchange rates unless otherwise indicated)

At the end of December, sales growth was remarkable across geographical areas. Sales increased considerably both in group stores (+23% at constant exchange rates) and in wholesale activities (+26%), which benefited from the recovery in travel retail. Hermès continued to develop its exclusive distribution network, while online sales pursued their upward trend worldwide.

• Asia excluding Japan (+22%) remained very dynamic throughout the geographical area. Sales performance in Greater China was sustained. In October, a fourth store opened in the Qiantan district in Shanghai, Mainland China, and Hermès inaugurated a store in Pangyo, in South Korea. Several stores reopened after renovation and extension work, such as the Hyundai Coex store in Seoul in December and the Hong Kong international airport store in November.
  
  
• Japan (+20%) recorded a steady, sustained increase in sales. In November, the Takashimaya store in Nagoya reopened after renovation and extension in a new location, and the Hermès in the Making exhibition showcased the house’s know-how in Kyoto.
  
  
• The Americas (+32%) saw an exceptional year in 2022. After the April opening of a new store in Austin, a new maison was inaugurated at 706 Madison Avenue in New York in September. This store offers clients an unprecedented experience of the creativity of Hermès and confirms the house’s attachment to the sustainability of objects with a whole floor dedicated to repairs. In Mexico, the store in Guadalajara reopened in October after renovation.
  
  
• Europe excluding France (+18%) recorded sustained growth, thanks to the loyalty of local clients and the resumption of tourist traffic. The Paseo de Gracia store in Barcelona was inaugurated in November, after being renovated and extended.
  
  
• France (+27%) improved strongly, with an acceleration at year-end thanks to high demand from both national and international clients. The store in Strasbourg reopened in November, after renovation and extension, in a new location in the city’s historical centre.
  
  

Sales by business line at the end of December
(at constant exchange rates unless otherwise indicated)

At the end of December 2022, all the business lines confirmed their high levels of sales, with Ready-to-Wear and Accessories, Watches and Other Hermès business lines posting a remarkable increase, reflecting the huge desirability of the house.

The Leather Goods and Saddlery business line (+16%) performed particularly well, benefitting from very sustained demand and a favourable comparison basis in the 4^th quarter. The growth in production capacities continued with five site projects. These new capacities will reinforce the nine centres of expertise located across the national territory, with their production units, workshops and training centres. In 2023, Hermès will open two new leather goods workshops: one in Louviers (Normandie) and the other one in la Sormonne (Ardennes). The projects for new workshops sites in Riom (Puy-de-Dôme), L’Isle-d’Espagnac (Charente) and Loupes (Gironde) are ongoing. Hermès continues to reinforce its local anchoring in France in regions with strong manufacturing know-how, while also developing employment and training.

The Ready-to-Wear and Accessories division (+36%) pursued its strong growth, thanks to the success of the ready-to-wear, fashion accessories and footwear collections. The men’s and women’s spring-summer 2023 collections, mixing casual, sophisticated, bold and light spirits, were respectively presented in June and October. Demand was also strong for fashion accessories and footwear, with models that express the abundance of the house’s know-how.

The Silk and Textiles business line (+20%) achieved a splendid performance, supported by the growth in production capacities and the success of the collections, especially through the exploration of exceptional materials and artisanal know-how, such as hand-weaving and leather work.

Perfume and Beauty business line (+15%) gained from the successful launches of new creations, such as Terre d’Hermès Eau Givrée, the Eau de parfum H24, and the Colognes with Eau de basilic pourpre. Two years after its creation, the Hermès Beauty business line continues its strong growth, thanks to the limited editions of Rouge Hermès and the launch of Hermès Plein Air, the new chapter for complexion.

The Watches business line (+46%) confirmed its outstanding performance, displaying singular creativity and unique style nurtured by all the other métiers of the house, as well as exceptional watch-making know-how. In November 2022, the Arceau Le temps voyageur watch won two awards at the Grand Prix d’Horlogerie de Genève (Geneva Watchmaking Grand Prix). The new Hermès H08 men’s watch confirmed its success, alongside the house’s classic models.

The Other Hermès business lines (+30%), which include Jewellery and Homeware, continued on their upward trend, highlighting the full creative strength and singularity of the house. The seventh haute bijouterie collection, called Les jeux de l’ombre, was presented in Paris this summer and in New York this autumn.

Particularly robust results

Recurring operating income increased by 33% to €4,697 million compared to €3,530 million in 2021. Thanks to the leverage effect generated by the strong sales growth and the exceptional performance of the collections, annual recurring operating profitability reached its highest level ever at 40.5%, up from 39.3% in 2021.

Consolidated net profit (group share) amounted to €3,367 million (29% of sales), an increase of 38% from €2,445 million in 2021.

Operational investments represented €518 million and adjusted free cash flow reached €3,405 million.

After distribution of the ordinary dividend (€837 million) and inclusion of share redemptions (€116 million for 104,269 shares outside the liquidity contract), the restated net cash position increased by €2,672 million to €9,742 million compared to €7,070 million as at 31 December 2021.

A responsible, sustainable model

The group pursued its dynamic recruitment, adding some 2,100 new hires to the workforce this year. At the end of December 2022, the group employed 19,700 people, including 12,400 in France. True to its commitment as a responsible employer and in recognition of the employees’ contribution to the performance and success of the group, Hermès will pay an exceptional bonus of €4,000 in 2023, to all the employees worldwide.

Hermès strengthened its commitments in the fields of education and knowledge transmission with the launch of the École des artisans de la vente in April and the rollout of the École Hermès des savoir-faire, opening a new Apprentice Training Centre at the Ardennes regional hub of expertise. The group has made another five-year commitment in an amount of €61 million for the actions of the Fondation d’Entreprise Hermès.

In line with the house’s commitments for the fight against climate change, Hermès pursued its actions in line with the emissions reduction targets validated by the Science Based Target initiative (SBTi). Hermès aims to reduce emissions by 50.4% on scope 1 and 2 in absolute value and by 58.1% in intensity on scope 3, over the 2018-2030 period. The house already offsets 100% of scope 1&2 emissions, and most of transport-related emissions, thanks to high environmental and societal value programmes. Regarding the protection of biodiversity and resources, the house also introduced a demanding responsible construction standard that integrates sustainability issues across the life cycle of real-estate projects. It was certified in November 2022 by an independent third party, as being more demanding that the main global standards.

In 2022, Hermès again saw an improvement in non-financial ratings reflecting the strength of the CSR commitments and the reinforced transparency. MSCI published a greatly improved "AA” rating (versus BBB in 2020 and then A in 2021). Sustainalytics ranked the house as the best company in Textiles and Clothing (number 1 out of 191 companies) and in the Luxury Goods sector (number 1 out of 102 companies), with the highest "Negligible Risk” classification. Moody’s ESG Solutions ranked Hermès in 5^th position in the Luxury Goods and Cosmetics sector, thus consolidating the group’s position in the CAC40 ESG index. Finally, Hermès joined the CDP’s A-list, making the house one the world’s 330 top-performing companies in environmental matters.

Proposed dividend

At the General Meeting to be held on 20^th April 2023, a dividend proposal of €13.00 per share will be made. The €3.50 interim dividend, paid on 22^nd February 2023, will be deducted from the dividend approved by the General Meeting.

Outlook

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.

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

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.

The press release and the presentation of the 2022 results are available on the group’s website: https://finance.hermes.com

At the Supervisory Board meeting on 16^th February 2023, Executive Management presented the audited financial statements for 2022. The audit procedures have been completed and the audit report is under preparation.
The complete consolidated financial statements will be available by 31^st March 2023 at the following address https://finance.hermes.com and on the AMF website: www.amf-france.org

Upcoming events:

• 14^th April 2023: Q1 2023 revenue publication
• 20^th April 2023: General Meeting of shareholders
• 28^th July 2023: Publication of H1 2023 results
  
  

2022 KEY FIGURES

⁽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.

INFORMATION BY GEOGRAPHICAL ZONE ^(a)

^(a) Sales by destination.

INFORMATION BY SECTOR

⁽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.

2022 quarterly revenue

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Extra-financial performances

APPENDIX – EXTRACT FROM CONSOLIDATED ACCOUNTS

Financial statements of the year, including notes to the consolidated accounts, will be available at the end of March 2023 on the website https://finance.hermes.com, together with the other chapters of the Annual Financial Report.

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(1) Transferable through profit or loss.
(2) Net of tax.

CONSOLIDATED BALANCE SHEET

ASSETS

LIABILITIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF CASH FLOWS

REMINDER

2022 HALF YEAR KEY FIGURES

⁽⁶⁾   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.

⁽⁷⁾   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.

⁽⁸⁾   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.

⁽⁹⁾           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.

⁽¹⁰⁾           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.

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