Hermès // 2021 Universal Registration Document

1

PRESENTATION OF THE GROUP AND ITS RESULTS COMMENTS ON THE CONSOLIDATED FINANCIAL STATEMENTS

The desire to give more online visibility to most of the House’s objects is at the heart of this omnichannel strategy. hermes.com is the House’s largest showcase and presents all the métiers . This year, Hermès face and hand products have been added to the online offering. Hermès Beauty was also launched on the Chinese Tmall e-commerce site from January 2021. The hermes.com platform continues to evolve technically. It is gradually moving to a cloud system for better performance and capacity. Emphasis was placed on operations in order to improve the customer experience, through services such as digitisation of invoices and auto-completion of delivery addresses, new payment methods such as Apple Pay, or lastly, partnerships with new carriers.

The number of new online shoppers was up by 60% in 2021 and the time spent online by these new customers has further increased. Accelerating the roll-out of omnichannel services provides a better experience for visitors and customers. They can now obtain information online about the in-store offering in 24 of the 29 countries where the e-commerce platform is present ( i.e. 190 stores), in order to prepare their visit to the store. The e-reservation service, which enables them to reserve the desired items in around 30 stores, continues to be rolled out. A new service for making appointments with an in-store sales associate is also being launched.

COMMENTS ON THE CONSOLIDATED FINANCIAL STATEMENTS

1.8 AFR

INCOME STATEMENT

1.8.1

2021

2020

2019

In millions of euros

Revenue

8,982

6,389

6,883

Cost of sales Gross margin

(2,580)

(2,013)

(2,125)

6,402

4,376

4,758

Sales and administrative expenses

(2,137)

(1,699)

(1,816)

Other income and expenses Recurring operating income

(734) 3,530

(696) 1,981

(604) 2,339

Other non-recurring income and expenses

-

91

-

Operating income Net financial income Net income before tax

3,530

2,073

2,339

(96)

(86)

(69)

3,435

1,986 (613)

2,270 (751)

Income tax

(1,015)

Net income from associates CONSOLIDATED NET INCOME

34

16

16

2,454

1,390

1,535

Non-controlling interests

(8)

(4)

(7)

NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT

2,445

1,385

1,528

Other income and expenses amounted to €734 million, compared with €696 million in 2020. They include depreciation and amortisation of €512 million (€468 million in 2020), half of which relates to property, plant and equipment and intangible assets and the other half to rights-of-use. The increase in depreciation and amortisation reflects continued investments in the distribution network, production facilities, digital technology and information systems. Other expenses also include €122 million related to free share plans. Recurring operating income amounted to €3,530 million, up by 78% compared to 2020. After an exceptional first half with a profitability of 41%, the second half stood at 38% following the acceleration of recruitment and communication expenses, as well as the negative impact of exchange rates on the second half of the year.

In 2021, the Group’s consolidated revenue amounted to €8,982 million, up 42% at constant exchange rates and 41% at current exchange rates compared to 2020. Over two years, this increase reached 33% at constant exchange rates. The gross margin rate was 71%, up by 2.8 points compared to 2020. This improvement stems from a leverage effect on fixed production costs, a gradual improvement in productivity and an exceptional inventory disposal rate. Sales and administrative expenses, which represented €2,137 million, compared with €1,699 million in 2020, included in particular €421 million in communication expenses compared with €279 million in 2020, a year in which many events were postponed or cancelled due to the health crisis.

38 2021 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL