French luxury goods maker Hermes cautioned on Wednesday that 2016 would be a “complicated year” as it posted higher full-year margins and profits on the back of one of the highest sales growth levels in the sector.
CEO Axel Dumas said Hermes was bracing for volatile demand and reiterated that sales growth could be below its medium-term target of 8 percent at constant exchange rates.
“There has been an economic slowdown in China, a strong dollar that held back tourist flows to the U.S. and now repeated terrorist attacks in the euro zone,” he said. “We see 2016 as a complicated year.”
Dumas added that the number of tourists in France had not returned to the levels before the November Paris attacks and that it was too early to gauge the impact of Tuesday’s suicide bombings in Brussels, which killed at least 30 people.
Hermes sales rose 8.1 percent at constant exchange rates in 2015, slowing from the previous year’s 11.1 percent but significantly higher than rivals such as LVMH’s Louis Vuitton and Dior, and Kering’s Gucci, which saw low single-digit percentage sales growth.
Hermes said it would raise prices this year by 3-4 percent in the euro zone to reflect the increase in the cost of goods sold but would leave them untouched elsewhere to reduce price discrepancies with other regions.
Hermes is benefiting from two new productions sites in France, which are boosting its supply of handbags and other leather goods. Earnings were also buoyed by sales in Japan, which has seen an influx of Chinese tourists.
Hermes said recurring operating income rose 19 percent in 2015 to 1.541 billion euros (£1.2 billion), producing a margin of 31.8 percent, or 30 basis points higher than the previous year.
It proposed raising the dividend by 14 percent to 3.35 euros a share after posting a 13 percent increase in 2015 net profit to 973 million euros, representing 20 percent of sales. Hermes shares were up 2.4 percent for a market value of 34 billion euros.
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