Shares of the French luxury goods group Hermès International
$RMS (+2.19%) fell by more than 7% on Wednesday. The reason was diluted earnings per share reported for the first half of the year, which fell short of analysts’ expectations and thus overshadowed a strong operating result. Despite a higher gross margin, the results were weighed down by negative currency effects.
Operating profit for the first half of the year rose to €3.35 billion, exceeding the analyst consensus of €3.29 billion. However, diluted earnings per share of €21.32 fell short of the forecast of €21.56.
Revenue, at €8.16 billion, was in line with the average analyst estimate. Currency fluctuations reduced revenue by more than €360 million in the first half of the year. However, currency-adjusted growth accelerated from 5.6% in the first quarter to 6.7% in the second quarter.
The Asia-Pacific region excluding Japan continued to be a weak spot: Here, revenue rose by 2.5% on a currency-adjusted basis in the second quarter, falling short of the consensus estimate of 4.0%.
Japan grew by 12.3%, exceeding the forecast of 10.3%, while the Americas region grew by 13.7% (consensus: 13.3%). Europe, including France, expanded by 7.4%, exceeding the estimate of 6.6%.
Broken down by product line, revenue from leather goods rose by 10.2% on a currency-adjusted basis in the second quarter, remaining slightly below the estimate of 11%. The silk and textiles segment posted a 12.2% increase, while sales of perfumes and cosmetics fell by 9.5%.
The operating margin reached 41.0% of revenue. This exceeded the analyst consensus of 40.6% but was below the prior-year figure of 41.4%. The company reported no impact from tariffs. Adjusted free cash flow rose by 18% to €2.2 billion, and the net cash position increased by €2.2 billion year-over-year to €12.9 billion.
Hermès stated that it reaffirms “an ambitious target for revenue growth at constant exchange rates,” but did not provide a specific figure despite geopolitical and monetary uncertainties.
Jefferies, which rates the stock “Buy” with a price target of €2,000, stated that the investment debate will “likely continue to focus on relative growth that is unimpressive by the group’s high historical standards.”
The research firm also raised the question of whether “the persistently weak growth in China” was partly due to the company limiting the availability of certain products in that market.
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