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Hermès hits €100 billion market cap for the first time

Hermès hits €100 billion market cap for the first time

The stock market praised Hermès’ performance and for the first time in its history, the share exceeds the symbolic capitalisation of €100 billion on Friday. And for good reason, despite Covid-19, the French luxury house ended the year 2020 with solid results, limiting the decline in earnings to 9%, driven by its online and Asian sales.

 

The Hermès Group asserts its resilience with the publication of its results at the end of 2020, with a decline in earnings limited to 9% thanks to the rebound in its business in Asia, which offsets the decline in Europe, as well as its online sales channel.

 

Hermès also announced an upturn in its remarkable fourth-quarter sales, with a strong acceleration of +16%. Group sales totaled 6.38 billion euros, a decline of 7.2%, but nonetheless higher than experts’ expectations. There was a slight decline of 2% in sales in physical stores, a satisfactory figure given the health context and the many lockdowns.

 

In the wake of these results, the stock markets applauded Hermès‘ performance and its share price soared 6.16% to 993 euros almost half an hour after the opening of the Paris stock market, representing the strongest increase in the CAC 40, which had recovered 0.31%. The stock took off and for the first time in its history, in the morning, it exceeded the symbolic cap of 1,000 euros, corresponding to a capitalization of more than 100 billion euros.

 

This historic progression brings the valuation of the luxury giant above the symbolic 100 billion euro mark for the first time in its history, to nearly 105 billion euros. Hermès thus becomes the third-largest market capitalization in the CAC 40, just behind the giants LVMH and L’Oréal.

 

The year 2020 was marked by unprecedented health and economic crisis. In this uncertain environment, Hermès demonstrated its ability to adapt, and the agility and solidity of its craftsmanship model. The reduction in tourist flows was offset by the loyalty of local customers and the strong growth in online sales,” Hermès detailed.

 

In the fourth half, sales grew by an impressive 21% worldwide, with 47% for the Asia-Pacific region (excluding Japan) alone. The Asia-Pacific region recorded an increase of 12.6% over the year, while Europe, which was in great difficulty, ended the year down 24%. As a result, the Group’s net profit totaled 1.38 billion euros, down 9%, while the operating margin was 31%, compared with 34% last year.

 

The success of online sales was confirmed in all regions, and the deployment of the new platform continued in Asia and the Middle East,” said Hermès. Managing Director Axel Dumas held a conference call with journalists and expressed that this increase in e-commerce “was very very strong, it started during the lockdown and did not stop when the stores reopened“.

 

The company will continue to develop its distribution network throughout the fiscal year 2020 with store openings and renovations and expansions. Wholesale sales did not fare as well, penalized by the absence of travelers, and posted a 32% decline.

 

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With nearly 16,600 employees, including 10,383 in France, the Hermès Group affirmed the payment of a bonus of 1,250 euros “to all employees for their commitment and contribution to results“. Axel Dumas said he was “confident for the future“, although “the context remains unpredictable“.

 

On May 4, a Shareholders’ Meeting will be held at which Hermès will decide whether or not to set the dividend at 4.55 euros per share. “The interim dividend of €1.50, which will be paid on March 4, 2021, will be deducted from the dividend to be decided by the Shareholders’ Meeting,” explains the Group.

 

Overall, Hermès concludes 2020 with strength and ambition, while the share is trading at 87.5 times its 2020 earnings compared to an unprecedented average of 40.2.

 

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Featured Photo : © Hermès

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