Hermès reported 55% net profits increase in first 6 months of 2010

hermès fall winter 2010 / reuters pictures

French luxury house Hermès yesterday released their financial results for the first 6 months of 2010. here are some brief points, and some of my thoughts:

- sales increased by 23% as compared to 2009: europe up 17%, US region up 26%, asia up 45%. however japan was down 2% (was it because of lady gaga defacing the birkin bags at narita airport??).

- leather goods, being their core business reported 23% increase in sales.

- net profit came in at 55% increase. assuming there wasn't anything exceptional in 2009 distorting comparisons, they must have controlled their costs very tightly, considering sales were up 20-odd %. they created 116 new jobs this year (more costs), hence savings must have been made elsewhere and not on the payroll. more fabric bags perhaps?

- they don't expect similar results for the second half of the year: they targeted a 12% increase in sales, barring any exceptional market conditions. hermès did pretty well in second half of last year, especially when the markets were picking up. hence in percentage terms a 12% increase, when the economy is still recovering, looks decent to me.

source: yahoo.com

- share price in hermès increased 53% in 2010. during the financial crisis, we saw many retailers going into liquidation, closing stores, downsizing etc. it seems rational to assume that the luxury goods companies would suffer, crash and burn in that crisis. like the other industries, times like these test the leadership capabilities, how well they steer their ship. i still firmly believe that within the retail industry, fast affordable fashion and the top tier true luxury firms would survive and indeed do well. those in the middle tier pricing are just too wishy washy.

- silks and textiles reported a 17% increase in sales. speaking of silks, deluxeduck alerted me to the new 140cm x 140cm silk scarf as seen on above fall winter 2010 advertising campaign. "hurray!" i shouted to myself, finally a silk scarf big enough for men to drape nonchalantly on their shoulders. but the large format silk scarves retail at GBP510.