Focus on creativity of collections and integrated artisanal model, control of know-how and singular communication, loyalty of clients and a balanced distribution network helped make Hermès the best-performing luxury group in 2023 among its rivals.
Hermès group’s consolidated revenue amounted to $14.5 billion (€13.4 billion) in 2023, up 21 percent at constant exchange rates and 16 percent at current exchange rates compared to 2022.
Recurring operating income amounted to $6.2 billion (€5.7 billion), i.e., 42.1 percent of sales. Net profit group share reached $4.6 billion (€4.3 billion), an increase of 28 percent.
“In 2023, Hermès has once again cultivated its singularity and achieved an outstanding performance in all métiers and across all regions against a high base,” said Axel Dumas, executive chairman of Hermès, in a statement.
“These solid results reflect the strong desirability of our collections and the commitment and talent of the house’s women and men,” he said. “I thank them all warmly.”
Here, in Hermès' words, is its account of its 2023 performance and the outlook for 2024:
In the fourth quarter 2023, sales reached €3,364 million, up 18 percent at constant exchange rates and 13 percent at current exchange rates, despite the particularly high comparison base in America and in Asia.
The Paris-based group pursued the trend seen over the third quarter, thanks to sustained sales.
Hermès’ 2023 results compared favorably with Gucci owner Kering’s numbers (see story) for the same period, and in line with growth recorded at rivals LVMH and Richemont, albeit a tad better.
Sales by geographical area at the end of December (at constant exchange rates unless otherwise indicated) At the end of December, all the geographical areas posted a solid performance with homogeneous growth of around 20 percent.
Sales increased both in the group’s stores (+20 percent), which benefitted from a strong demand and the reinforcement of the exclusive distribution network, and in wholesale activities (+24 percent), driven by the travel retail business.
Asia excluding Japan (+19 percent) pursued its strong growth, with significant increases in sales in all the countries of the region.
A second store opened in October in Chengdu, the capital city of the province of Sichuan, becoming the house’s 33rd address in mainland China, following the opening of a store in Tianjin in July.
In South Korea, the store at the Shilla Hotel in Seoul reopened in December after renovation and extension work.
Japan (+26 percent) recorded a steady and sustained increase in sales.
Hermès' new store in Sapporo, Japan. Image: Hermès'
The Daimaru Sapporo store on Hokkaido island and the Takashimaya store in the center of Kyoto were inaugurated in October and November, after renovation and expansion.
America (+21 percent) confirmed an outstanding performance, in particular in the second half of the year.
After being renovated and expanded, the Chicago store was inaugurated at the end of October, and the Bellagio store reopened in Las Vegas in December, following the store openings of Naples on the Gulf of Mexico in February, Aspen in June and Los Angeles Topanga in July.
The Hermès in the Making traveling exhibition which showcases the know-how of the house, met with great success in Chicago in October.
Europe excluding France (+20 percent) and France (+20 percent) recorded strong growth, thanks to the loyalty of local clients and to the dynamic of tourists flows.
Following renovation, the Crans-Montana store in Switzerland reopened in December, after the store located in the historic center of Bordeaux in November and the Vienna store in Austria in September.
The Silk event Par un beau soir de carrés, staged in Brussels in November, attracted great attention.
Sales by sector at the end of December (at constant exchange rates unless otherwise indicated) At the end of December 2023, all the métiers confirmed their solid momentum, with ready-to-wear and accessories, watches and other Hermès sectors achieving a remarkable increase.
The leather goods and saddlery métier (+17 percent), which demand is very sustained, saw a strong increase.
The Maximors bag, with its sterling work, and Della Cavalleria Élan and Arçon bags have been unveiled.
Finally, the models displaying exceptional savoir-faire in an Arts & Craft’s spirit around the Haut à Courroies notably have met with great success.
In 2023, Hermès inaugurated the leather goods workshops in Louviers and la Sormonne, the first two industrial buildings in France to carry the E4C2 label that assesses environmental performance based on energy consumption and carbon emissions.
Production capacities continue to grow with four leather goods workshop projects over the next four years: Riom (Puy-de-Dôme) in 2024, L’Isle-d’Espagnac (Charente) in 2025, Loupes (Gironde) in 2026 and Charleville-Mézières (Ardennes) scheduled for 2027, which will reinforce the nine centers of expertise located all over France.
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 sector (+28 percent) pursued its strong growth, thanks to the success of the ready-to-wear and footwear collections.
The men’s and women’s spring-summer 2024 collections were very well received when they were presented at fashion shows in June and September, respectively.
The silk and textiles sector (+16 percent) recorded a solid performance, supported by the success of the collections which feature exceptional materials and unique craftsmanship.
Production capacities continue to expand, notably with the set-up of a new printing line at the Pierre-Bénite site in Lyon.
The perfume and beauty sector (+12 percent) benefitted from the success of both the latest creations and the house’s classics such as Terre d'Hermès, the Jardins collection and Twilly d’Hermès.
The Hermès Beauty range was enhanced with a fifth chapter at the end of September, Regard Hermès, inspired by the house’s emblematic shades, as well as with limited editions of Rouge Hermès.
The watches métier (+23 percent) confirmed its splendid performance, displaying singular creativity and remarkable watchmaking know-how, in both the complication models and the house’s iconic models.
The Hermès H08 line is a great success and welcomed several new models this year.
The other Hermès sectors (+26 percent), which include jewelry and homeware, recorded strong growth.
Jewelry showcased the Chaîne d’ancre design, reinterpreted in a multitude of shapes and materials unveiled at an exhibition at the Faubourg store in Paris in July.
Outstanding results Recurring operating income increased by 20 percent to €5,650 million compared to €4,697 million in 2022.
Thanks to the strong sales growth and the favorable impact of currency hedging, annual recurring operating profitability reached its highest level ever at 42.1 percent, up from 40.5 percent in 2022.
Consolidated net profit group share amounted to €4,311 million (32.1 percent of sales) compared to €3,367 million in 2022, an increase of 28 percent resulting from the outstanding operating performance as well as an improved return on cash management.
Operating cash flow was €5,123 million, up 25 percent. This enabled Hermès to finance €859 million of operating investments and a €794 million increase in working capital requirements, consistent with the strong rise in activity.
Adjusted free cash flow reached €3,192 million.
After distribution of the ordinary dividend (€1,359 million) and inclusion of financial investments (€316 million) and treasury share buybacks (€132 million for 74,954 shares outside the liquidity contract), the restated net cash position increased by €1,422 million to €11,164 million compared to €9,742 million as at Dec. 31, 2022.
Sustainable and responsible model The Hermès group continued to recruit and increased its workforce by around 2,400 people.
At the end of 2023, the group had 22,040 employees, including 13,700 in France.
Over the past three years, Hermès has created more than 5,400 jobs, including 3,300 in France.
True to its commitment as a responsible employer, and its policy of sharing the fruits of growth with all those who contribute to it on a daily basis, Hermès will pay at the beginning of the year a bonus of €4,000 to all its employees worldwide in respect of 2023, after announcing last July a new plan for the allocation of free shares to all the employees.
Hermès is strengthening its commitments in the fields of education and knowledge transmission particularly through the deployment of the École Hermès des savoir-faire, which has extended its leatherwork, cutting and stitching diploma courses in eight regional training schools in France this year.
In line with the house’s commitments to the fight against climate change, Hermès pursued its actions in line with its emissions reduction targets validated by the Science Based Target initiative (SBTi).
Hermès aims to reduce emissions by 50.4 percent on scope 1 and 2 in absolute value and by 58.1 percent in intensity on scope 3, over the 2018-2030 period.
Pursuing its commitment to quality and the development of sustainable materials for its 16 business lines, the house is continuing its drive to achieve certification for its 44 supply chains by 2024.
Thus, at the end of December, more than 80 percent of the leather goods division’s suppliers were LWG (Leather Working Group) certified.
In 2023, the group initiated the Science Based Targets for Nature (SBTN) process to set scientific targets for nature, in particular in biodiversity, fresh water, forests and soils. Hermès is one of 120 companies worldwide to have launched this process.
Regarding the protection of natural resources, the house also implemented its particularly demanding responsible real estate standard that integrates sustainability issues across the life cycle of real estate projects.
Proposed dividend At the general meeting to be held on April 30, 2024, a dividend proposal of €15 per share will be made.
The €3.50 interim dividend that will be paid on Feb. 15, 2024, will be deducted from the dividend approved by the general Meeting.
In addition, an exceptional dividend of €10 per share will be proposed to the general meeting. Post-closing event
No significant event has occurred since the closing on Dec. 31, 2023.
In line with its distribution network vertical integration strategy, the house has reinforced its relationship with its historical partner in the Middle East.
Thus, Hermès became in early 2024 a majority shareholder alongside its partner in the retail activities located in the United Arab Emirates. The latter remains the majority shareholder in the other countries of the region (Qatar, Kuwait and Bahrain).
The impact of the change in consolidation method resulting from this acquisition of a majority stake and the amount paid will not be significant on the 2024 consolidated financial statements.
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 2024 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.
For 2024, the theme will be In the Spirit of the Faubourg. This place, the fruit of Émile Hermès’ dream, is the beating heart of the house. It accompanies Hermès everywhere and inspires the effervescence and joyful spirit so dear to the house.
Hermès' new store in Sapporo, Japan. Image: Hermès'