HERMÈS - 2020 Universal registration document

CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Hermès International is a société en commandite par actions (partnership limited by shares) established under French law. It is listed on Euronext and governed by all laws applicable to commercial companies in France. Its registered office is located at 24, rue du Faubourg Saint-Honoré, 75008 Paris (France). The consolidated financial statements present the accounting position of Hermès International and its subsidiaries (the “Group”), together with interests in associates (see Note 1.3). They are prepared on the basis of annual financial statements for the period ended 31 December, and are expressed in euros. The consolidated financial statements as presented were approved by the Executive Management on 18 February 2021 and will be submitted to the shareholders for approval at the General Meeting on 4 May 2021. The annual consolidated financial statements were also reviewed by the Audit and Risk Committee at its meeting on 17 February 2021.

ACCOUNTING PRINCIPLES AND POLICIES

NOTE 1 Impacts of the Covid-19 pandemic 1.1

The Group believes that the decline in activity observed during 2020 s in certain regions, in connection with the pandemic, is not such as to call into question the recoverable amount of the assets located in these regions. In addition, Hermès donated €20 million to AP-HP (the Parisian public s hospital system), recognised in “Other expenses”. The foreign exchange derivatives portfolio has been adjusted to take into account the most recent budget forecasts. The impact on net income for the year was almost nil. Deferred tax assets related to tax losses remain non-material and were assessed taking into account the profit outlook for the entities concerned. In general, cost control and agility in inventory management have kept the Group’s profitability at a high level. Accounting standards 1.2 The Hermès Group’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as at 31 December 2020. 1.2.1 IFRIC IC DECISION OF NOVEMBER 2019 The Group applied the IFRIC IC decision of November 2019 on the determination of the term of leases. The Hermès Group owns most of its manufacturing facilities and is tenant of most of the stores and offices in the cities where it operates. Given that its commercial leases are generally contracted for long periods, the Group does not take into account any options to extend at the date the contract comes into effect, with some exceptions. When negotiations are started with the lessor in order to exercise an option to extend, the lease term is adjusted accordingly. In France, in the case of 3-6-9-type commercial leases, the lease term used is nine years, except special cases. In the event that only Hermès has an option to terminate a lease, the Group assesses, at the date the contract comes into effect, all the facts and circumstances providing economic incentives not to exercise this option, taking into account criteria such as the actual nature of the asset, all costs related to termination, and the duration of the business plan.

The health crisis led to store closures throughout 2020, in compliance with various government instructions and to a drastic decline in international travel. The Group’s production facilities, which are mainly located in France, were temporarily shut down in the first half of the year, with the exception of the Hermès Parfums du Vaudreuil site, which started production of hydroalcoholic gel. Production then gradually resumed with the organisation and resources required to protect employees. In this context, the Group’s consolidated revenue for financial year 2020 amounted to €6,389 million, a decrease limited to -7% at current exchange rates and -6% at constant exchange rates compared to financial year 2019. True to its values, the Group has preserved jobs and maintained the basic salaries of its employees worldwide without having recourse to the exceptional governmental subsidies provided in various countries. In addition, in 2021 the Group will pay a bonus of €1,250 to all employees for their commitment and contribution to results. In the first half of the year, the operating profitability was impacted by strong vertical integration and the weight of fixed costs, consisting mainly of payroll and amortisation of investments and leases. As the business returned to growth in the second half of the year, recurring operating profitability improved to reach 31% for the full year. The impacts of the pandemic were all recognized in recurring operating income. The costs related to sub-activity have been excluded from the s valuation of inventories at 31 December 2020. Provisions for impairment of inventories have been updated to take s into account the longer turnaround times of inventories and the reduced prospects for the sale of certain seasonal products. Personal protective equipment for employees returning to sites was s paid for by the Group and recorded under sales and administrative expenses for around €10 million. The exceptional bonus of €1,250 per employee was provisioned at s the end of the financial year. Rent rebates granted by lessors in the context of the Covid-19 s pandemic were recognised in “Other income” in the amount of €10 million at 31 December 2020.

5

2020 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

359