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French luxury goods company Hermes reported an “exceptional” year in 2016 as for the first time revenues passed €5bn, profits reached over €1bn and its operating margin hit an all-time high.

Hermes said on Wednesday that like-for-like sales increased 7.5 per cent to €5.2bn, net profit was up 13 per cent to €1.1bn and operating income grew 10 per cent to €1.7bn. The group reached an operating margin of 32.6 per cent, due to a favourable impact of foreign
exchange hedges.

“Once again a strong year for Hermes,” said chief executive Axel Dumas in an interview. “It’s keeping its galloping moment.”

He added: “2016 was an exceptional year because the stars were aligned for us: currency, growth and the collections did well. We maintain caution for this year.”

Growth was spread across all geographical regions and led by leather goods and saddlery, which was up 14 per cent. Within this division, home to handbag models such as Constance, Kelly and Birkin, “all models regardless of the price grew well,” said Mr Dumas. “The only constraint was the capacity of production.”

Hermes’ results outperform the luxury sector as a whole, which in the fourth quarter of last year reported an improvement in fortunes after several years of pressure due to a slowdown in Chinese spending and declining tourism in Europe after terrorist attacks.

Mr Dumas said: “China is not back for us because China was never out.”

He said that while tourists flows are down in Paris, some of this spending has moved to Rome or London: “Business in the UK is booming. With Brexit there has been a decrease in the pound and that’s brought a lot of tourists to the UK.”

Hermes isn’t expanding its number of stores but it has been refurbishing them and increasing their size to improve sales per square metre. Sales of watches were down by 3.2 per cent – hurt by too much weighting to the challenging Asian market.

Net cash on the company’s balance sheet grew by €750m to €2.3bn and Hermes announced a dividend of €3.75.

Copyright The Financial Times Limited 2017. All rights reserved.
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