Financial Data and Key Metrics - Revenue for H1 2024 exceeded €7.5 billion, up 15% at constant exchange rates, driven by strong customer loyalty and new customer acquisition [50][64] - Gross margin rate for H1 2024 was 70.6%, down from 72.2% in H1 2023, primarily due to currency hedges and lower sell-through rates [51] - Net income group share reached nearly €2.4 billion, a 6% increase compared to H1 2023, with net profitability nearing 32% [54] - Operating cash flow grew 8% year-on-year, reaching €2.8 billion, while operating investments are expected to accelerate in H2 to reach €1 billion [70] Business Line Data and Key Metrics - Leather goods and saddlery saw remarkable growth, driven by increased production capacity and sustained demand [47] - Ready-to-wear and accessories grew by 15%, supported by successful collections and footwear [47] - Perfume and beauty sector rose, supported by new launches like Oud Alezan and H24 Herbes Vives, while watches remained stable [48] - Other Hermès products, including jewelry and homeware, grew by 19% [48] Market Data and Key Metrics - All regions recorded double-digit growth, with France up 15%, Europe (excluding France) up 18%, Japan up 22%, and Asia (excluding Japan) up 10% [65][66] - The US market showed strong dynamics, with 13% growth in both Q1 and Q2, driven by a "flight to quality" sentiment among clients [24][25] - China experienced a drop in footfall, particularly among aspirational clients, due to economic factors like the real estate market [96] Company Strategy and Industry Competition - The company continues to invest in production capacity, with new leather workshops and upstream capacities for silk, metal hardware, and perfumes [55] - Hermès is expanding its distribution network with new stores in the US, Asia, and France, following a multi-local approach [43] - The company remains committed to sustainability, with investments in reducing CO2 emissions and biodiversity initiatives [61][62] Management Commentary on Operating Environment and Future Outlook - Management highlighted the resilience of the brand in a complex global economic and political environment, with strong momentum across all regions [40][64] - The company expects H2 2024 to remain uncertain but plans to continue creating jobs and investing in all divisions, including new store openings and product launches [72] - Inflation in cost of goods, particularly materials and salaries, is expected to impact pricing strategies for 2025 [29][30] Other Important Information - The company has 23,200 employees, with 62% based in France, and continues to invest in diversity and inclusion initiatives [37] - Hermès paid a €4,000 bonus to all employees in February 2024 and distributed shares under the Free Action Plan [44] - The company’s Moody ESG rating increased, reflecting its commitment to transparency and sustainability [63] Q&A Session Summary Question: Impact of currency hedges on H1 and H2 - The impact of currency hedges was around €60 million in H1 and is expected to be €160 million in H2 due to inventory sell-off [8] Question: Pricing strategy for 2025 - Pricing will be influenced by inflation in cost of goods, including materials and salaries, with a focus on maintaining coherence with historical strategies [28][29] Question: US market dynamics - The US market showed strong growth, with regional variations between the West Coast, East Coast, and Central regions like Texas and Florida [24] Question: Impact of Olympics on business - The Olympics are expected to disrupt business in France, similar to past events in London and Beijing, but the company has budgeted for this impact [27] Question: Gross margin pressure in H2 - Gross margin pressure is expected to continue in H2 due to currency effects and lower sell-through rates, particularly in Greater China [101][109] Question: Consumer behavior in China - Chinese consumers are becoming more sophisticated, focusing on high-quality products rather than logos, but footfall has dropped due to economic factors [96][97] Question: Impact of Japanese yen depreciation - The company increased prices in Japan at the beginning of 2024 and expects the yen to appreciate in 2025, which will influence future pricing strategies [101][102]
Hermes(HESAY) - 2024 Q2 - Earnings Call Transcript