Good morning, ladies and gentlemen. Welcome to the Presentation of the 2022 First Half Results for Hermès International. We give the floor now to Mr. Axel Dumas, Chief Executive Officer of Hermès International, and Mr. Éric du Halgouët, Chief Financial Officer. Gentlemen, you have the floor.
Yeah.
Good morning, everybody. I would like to thank you for joining us for the publication of the results of H1 2022. I'm very happy, after a historic 2021, to present to you once again excellent results in terms of revenue and profitability. This performance rests above all on the quality of the work of our teams that I would like to warmly thank. These results illustrate the great appeal of the House of Hermès. Our objects are conceived in an artisanal manner with an approach of durability without any trade-off on quality. Our performance of H1 rests on a burgeoning creativity, asserted style, and exceptional know-how that have carried forward the growth of our 16 métiers. It testifies to the desirability of the Hermès objects with our customers everywhere in the world, in sync with the expectations and values.
The geographical balance of our network with the omnichannel and exclusive network allows us to be close to our customers and meet with new customers. This unstable world shows that the solidity of our model, which carries focus and momentum and sustainable growth, and thus we advance with confidence, faithful to our values and our role as a socially responsible company in solidarity with our teams and our partners. This leads to strong commitment in the creation of jobs, the revitalization of territories, and the protection and transmission of know-how. Let us now come to the activity. Revenue is up to EUR 5.5 billion at the end of June, up by +24% at current exchange rates and +23% at constant exchange rates.
All the regions have flagged very solid strong performance with the good resistance, resilience of Asia, despite the health context in China. Growth was particularly sustained in the stores of the group, up by 23%. The wholesale activities have also been up by 25%, namely thanks to a resumption of travel retail sales. The omnichannel network has developed, and online sales have strengthened everywhere in the world. The sales of the second Q2 have reached EUR 2.7 billion, up by +26% at current rates and +20% at constant rates, with a strong momentum of the 16 métiers. Let us look at the activities per geographical zone. In H1 of 2022, all the regions have flagged strong performance with strong double-digit progression.
France, +41%, Europe, excluding France, +34%, have pursued their strong growth with loyalty in local customers and resumption of tourism flows in France, U.K., and Italy. Japan, +20%, has shown remarkable performance once again. Asia, excluding Japan, +15%, has been carried forward by a strong momentum in all of the region, namely by a sustained activity in Singapore, Australia, and Korea. Greater China has recovered strongly in June after having been penalized by new health constraints and closure of stores in April and May, mainly in Shanghai and Beijing. America, finally, +34%, pursues a very good momentum. The geographical distribution remains balanced as the slight evolutions reflected the drop in the weight of Asia to the benefit of Americas. Let us look at the activity per métier.
At the end of June 2022, all the métiers have confirmed a strong momentum with progression, remarkable progression of silk clothes, accessories, watches, and other métiers of Hermès, that is bijouterie and home universe. The growth of leather, +12%, was based on a sustained growth and an increase of production capacity in sync with our annual objectives. The clothes and accessories métiers, +36%, has pursued its beautiful momentum thanks to the success of the collections of ready-to-wear fashion accessories and shoes. The new creations encounters great success alongside the iconic objects of Hermès. Silk and textile métier, excellent progression for women and men's silk.
Hermès perfumes, +23%, has benefited from the success of the launches of the new chapter of Hermès Beauty, Hermès Plein Air, dedicated to complexion, and the collection of perfumes has been enriched by the Terre d'Hermès Eau Givrée. Watches, +55%, had a remarkable performance thanks to the development of pieces with exceptional know-how, such as the watch Arceau Le Temps Voyageur and the success of its store stalwarts, such as H08 and Cape Cod. Finally, the other métiers of Hermès, +33%, have pursued their strong momentum. The evolution of the distribution of the métiers reflects strong progression of clothes and accessories and other métiers, and leather has pursued its growth in line with the objectives. Under the artistic direction of Pierre-Alexis Dumas, the creations have been well received.
Let us mention some in the first half of the year, the leather collection, the success of the Hermès suitcase, which is customizable, but also Hac à Dos, Bolide, Kelly, and Della Cavalleria. The women's ready-to-wear collection and men's ready-to-wear collection have also met with beautiful reception during the Parisian Fashion Week.
I'd also mention the new table service called Soleil d'Hermès, Hermèsistible, and the new cologne, Eau de Basilic Pourpre. Home collections presented during the Milan Design Week 2022 were also wildly successful. The Hermès pavilion had over 60,000 visitors this year. Now we're investing to support production capacity in all our métiers, making about a third of our investments this half year. Three leather production sites are being built and will be open in the next five years, with an eye to establishing clusters of production. Work continues on various leather sites in Saumur, Louviers, Riom. There are also projects for L'Isle-d'Espagnac and Loupes, which will begin this half year. In Lyon, there's the enlargement of the Pierre-Bénite textile site, which continues.
Investments are also growing in other métiers, such as shoes in Italy, perfumes in France at Le Vaudreuil, and watches in Switzerland, inter alia. Let's talk about our omnichannel exclusive integrated distribution network. There's real complementarity of the retail and e-commerce network, which keeps us close to our local clients and opens Hermès doors to new customers. We're continuing to increase our investments in the multi-local distribution networks, such as in stores in the U.S., opening our first store in Austin. This is our first store in Texas. We're also be opening our first store in the province of Henan and Zhengzhou. We are further extending, renovating, and enlarging stores in Doha, Dubai, the Middle East, Bangkok, Hong Kong, Macau, locations in Asia. E-commerce is also an entry to the Hermès universe, and it's performed beautifully as well.
We're seeing strong growth in traffic and sales in all countries. 78% of e-commerce platforms are new Hermès customers, first-time customers. Thanks to omnichannel services, thanks to a broader product offering, we're seeing positive momentum, great complementarity between the brick-and-mortar network and the e-commerce network. In the first half of 2022, our house felt it was very important to resume the events we organize to really show the authenticity and the unconventional nature of our house. We had the 12th edition of the Saut Hermès in Paris, and we had a French rider who won the Saut Hermès, Kevin Staut. The Hermès in the Making is where we invite people to meet with our artisans, and several tens of thousands of people attended these in Italy and the U.S.
Lastly, there was the exposition La Fabrique de la légèreté, tying into the theme of the year, and took place in Tokyo. Hermès?
Hermès pursues its commitment as a responsible employer. First of all, the group has accelerated its job creation by recruiting more than 800 persons, of which 600 in France in H1, where Hermès produces, as you know, more than 80% of its products. The acceleration of recruitment ought to be pursued, will be pursued in the H2 to strengthen the teams in all the métiers of Hermès. After a first gross monthly increase of EUR 100, then an exceptional group bonus of EUR 3,000 for all the employees of Hermès, in February we announced an increase of another EUR 100 gross monthly increase in July. This growth integrates the ambition of the house in terms of diversity of the integration.
The house has 6.4% of employees with disabilities, going beyond the legal limit of 6%. The excellence of know-how and transmission are priorities of Hermès. To accompany the growth of our activities, the in-house training systems have been continued. The École Hermès des savoir-faire has received a new promotion of artisans within the Ardennes leather cluster, and all regional clusters of leather are opening schools. The next ones will be in the southwest in Auvergne. The École des Artisans de la Vente opened its doors in Paris in April last to accompany the sales associates of Hermès in their training. Our commitments in social environmental fields continue with our strong local anchor, vertical integration, and closeness to our local suppliers.
Our ambitions in environmental terms are in sync with our commitment and trajectory of growth in 1.5 degree Celsius, validated by SBTi with different initiatives with regards to renewable sources of energy. 100% of our suppliers are already in green electricity in France. Finally, Hermès has won the Grands Prix de la Transparence in for all categories, rewarding the house for the quality of the information published in support of the regulatory information of SBF 120. I'd now like to give the floor to Éric du Halgouët, CFO of Hermès, who will be presenting the results to you. Thank you.
Good morning, everyone. Thanks to the great sales momentum, the group achieved exceptional results in H1 2022, whether we're talking about recurring operating profitability or net profitability. The income statement in H1 has a significant currency effect due to the conversion effect. On that point, the impact on revenue is +6 points, which means EUR 257 million. At constant exchange rates, growth is 23%. That's especially virtuous. It includes price effect on the order of 4%, which is greater than in previous years. The slight drop in the gross margin rate, 0.5, is mainly due to currency effect, firstly the dilutive effect or the conversion effect, furthermore the negative, slightly negative effect of currency hedges.
These downsides are partially offset by a leverage effect on production of fixed costs and an improvement in productivity. Furthermore, sell-through of our collections has been exceptional, both in fashion, métiers and other métiers as well. Communication spending reaches almost EUR 200 million, up 35% compared to the first half of 2021. Some events in Europe and in China were postponed for health reasons. An ambitious program has been set up for the second half to underpin growth. Sales and administrative expenses, which among other things include salesperson wages, and support function wages, as well as variable rent, reach EUR 982 million. There's a leverage effect on operational profitability of 0.8 versus H1 2021. Other income and expenses reaching EUR 406 million.
Mainly, here we're talking about amortizations of tangible and intangible amortizations, as well as amortizations of utilization rights. The recurring operating income, H1, reaches therefore EUR 2.3 billion, which is up 34% compared to the same period in 2021. Recurring operating profitability reaching its record level, 42% of sales, improved by more than one point compared to H1 2021. Financial results are an expense of EUR 35 million. That includes hedging expenses slightly down, as well as lease liabilities and remuneration of cash. We can see that figure. The tax rate in the first half is 28.5%. This is the estimated rate for the full year 2022 as well.
The expected drop by 1% compared to the reported rate for 2021 reflects the drop in corporate tax in France. Net income from associates, EUR 25 million. The growth is due to the strong momentum of our activities in the Middle East. Net income goes beyond EUR 1.6 billion, which is up 40% compared to H1 2021. Net profitability also reaches a record level, 30%, gaining more than 2 points compared to H1 2021. On this page, we can see an illustration of the very strong rebound in sales and net income after 2022, which had been impacted by the health crisis. Over a 10-year period, the compound average annual growth in revenue and net income is respectively 13% and 17%.
Since 1 January 2022, the group has been adhering to the IFRIC decision regarding accounting recognition of IT projects in SaaS mode. EUR 22 million, which would previously have been capitalized, were in this case booked as an expense. The group invested EUR 190 million in the first half of 2022. EUR 78 million spent on refurbishments and enlargements of the distribution and retail network, inter alia, with the construction of our future New York flagship called Madison 706, which will be opened next September. EUR 16 million spent on boosting our production capacities, among other things, in projects to build new leather production sites. Lastly, EUR 45 million or EUR 67 million, using comparable accounting methods, were invested in digital information systems and real estate to support métiers development.
Operating expenditure will speed up in the second half, should reach for the full year around EUR 550 million. Operating cash flow, EUR 2 million, growing 34% year on year. The change in working capital requirement results mainly in an increase in inventory and receivables, which is in line with the strong growth of sales. After taking into account operational expenditure and repayments of lease liabilities, available cash flow after adjustment reaches EUR 1.4 billion. Hermès International bought back a hundred and three thousand shares for EUR 150 million, paying EUR 850 million in dividends. Now, the line item, other changes, mainly has to do with currency changes vis-à-vis the euro, and that's the impact on cash flow.
Restated net cash position gaining more than EUR 600 million for the half yearly period, reaching EUR 7.7 billion as of end of June. Cash flow over 50% of our assets. Shareholders' equity over EUR 10 billion, representing around 70% of liability. The group has consolidated a very sound financial structure, enabling it to preserve its, maintain its independence and continue with its long-term strategy. I'd like to thank you for your attention and give the floor to Axel, who'll be talking about the outlook.
Merci, Éric.
Thank you, Éric, for these good results. May I now come to the outlook of the group, which is unchanged. For 2022, the impact of the COVID-19 pandemic remains difficult to assess as a result of the evolutions which are pursued in the different geographical zones. In the medium term, despite the economic, geopolitical, and monetary uncertainties in the world, the group confirms an objective of the progression of the revenue at constant rates, and which is ambitious. Thanks to this corporate model, Hermès business strategy, the development of long-term founder and creativity, mastery of know-how, and the creation which is original. In the H2, Hermès will continue to accompany this positive dynamic through acceleration of creative jobs, multi-local and multi-métiers, as well as the strengthening of investment in the métier.
The different strategic areas, environmental themes, namely through the Global Biodiversity Score and different certifications. The next semester will be marked by the development of the network, namely the new flagship 706 Madison in New York, followed by other openings in the U.S. and Asia, but also the eCommerce platform, which will be rolled out in Brazil. Faithful to our métiers creatives, we have just presented the Haute Bijouterie collection. Les Jeux de l'ombre is exhibited even today in the Faubourg store, which has met with great commercial success. We will present the women's ready-to-wear collection Spring-Summer 2023 during the Fashion Week in October in Paris. H2, the exhibition open to the public, La Fabrique de la légèreté, will be in Paris in La Villette, and Hermès in the Making will be traveling to Kyoto.
The Hermès Corporate Foundation pursues its commitment in education and sensitization of the youth in the métiers of craftsmanship with Manufacto and the study of biodiversity with Manufacture de la Nature. In conclusion, I'd like to thank our teams which endeavor every day to the success of Hermès and of our customers everywhere in the world. We are now available with Éric to respond to your questions. Thank you.
Thank you, ladies and gentlemen. Now you may ask your questions. Press O one on your keypad to do so. Please only ask two questions per person, and be sure to mute the webcast before asking your question. Thank you. We have a first question already. Here comes the first question. From Luca Solca.
Yes, good morning. Thank you for fielding my question. In the financial community, there's discussion of a possible slowdown in demand due to the likely recession. I'm wondering, have you seen any signals of any kind of slowdown? I see the Hermès figures are very strong indeed. For that matter, we just saw some very strong weeks in June. That was the first question. Another point, regarding digital developments, you're talking more and more about integration with physical retailing, retail stores.
In the various regions, is it possible to buy in the store for home delivery or buy from home for a store pickup? What are your plans in this area in terms of digital development? If you could just give us the thrust of your policy here, your digital strategy. Thank you very much.
Thank you, Luca. This is Axel. Good morning. To answer the first question. Yes. So far in our figures, we've seen no signs of any slowdown in any business activity whatsoever worldwide. There continue to be COVID-19-related crisis situations. For instance, the stores in Macau are still closed. But we have seen no signs of any kind of slowdown. Of course, we all read the newspapers with great interest, what's being said. We see various notes and so forth being written, saying this and that.
You know that Hermès traditionally tends to be impacted after others. Fairly infrequently are we the first to be affected. Let me say that regarding certain comments, what's striking is the quick rebound of China in June. That's that point. Now, you know, digital, very early on, we moved in the digital direction under Florian Craen's management of retail. We started to bring together major stores and retail to have an omnichannel approach, or to put it simply, we wanted the customer to be able to choose how they wanted to come to Hermès. It was up to us to then offer them the very best way to do so using the various retail channels. We're continuing to make large investments. Upcoming investments will be mainly in capacity. We've seen the success of our website.
It's significant, so we have to make large-scale investments to continue supporting the big ramp-up in traffic. Another interesting thing, this is a way of attracting new customers. I mean, it's major. I said 70% of internet customers are first-time customers, and this is their entry to the Hermès universe, and afterwards, they come into our stores, or, I mean, certainly many of them do. You're right, these are services we're proposing today. You can buy in the store and have it delivered. We'd already had a lot of delivery systems previously in our stores, and it also goes the other way around. You can buy something on the Internet and pick it up in the store. That's very frequent now.
We're seeing people, our customers very much like to come into the stores, even if they've bought from the Internet. We can say that we've got a big percentage of people that do that. Fairly typical, probably. A great deal of click-and-store traffic. Thank you, Luca.
Thank you.
Thank you.
We have another question from Thomas Chauvet, from Citi.
Good morning. Two questions, if I may. The first one on the profitability, which was exceptional in the H one, maybe not exceptional. Maybe it has become something that is structural. I wanted to have your feeling on the expected profitability of H 2. If you look at the cost phasing, catching up with expenses of last year, which was higher in H 2 as compared to H 1, even if you have a lot of projects for H 2 this year, the comparison basis is already integrated. Is it possible to plan improvement in operational margin year on year in H 2, close to 40%? That's my first question. My second question concerns the resale market.
Certain luxury brands, watches, but also Hermès and Chanel, have production capacity constraints structurally for the supply and demand of iconic products. The secondary or parallel market, which does resale activity for which the prices sometimes are quite exorbitant. Thanks to your teams, have you been able to measure the volumes for Hermès, volume that this represent as compared to your own production volumes, the new production of the new products sold in your stores, and what is your view on these resale platforms, and how are you sort of engaged in debate and discussions with these platforms which finally do, you know, parallel retail in parallel to those of yours with your own customer service in your own stores. Éric?
On your first question, you know, traditionally, the group's profitability in the second half is lower than profitability in the first half. The reasons for this, well, first of all, communications actions this year, project communications tended to be postponed due to COVID, especially in China, as I said earlier. Now we have a slate for significant communication in the second half, around EUR 550 million. Second point we said is we're strengthening our production capacities here as well. Our expenditure will go from EUR 200 million in the first half to probably EUR 550 million for the full year. Third point, we'll also be adding to our employee base to contend with in-store traffic and provide the quality of service we intend to maintain.
As Axel already said, we've announced new wage measures, particularly an increase by EUR 100 per month for all European employees, even in other countries as well, as of July 1. This will necessarily have an impact on the second half.
Well, thank you, Éric . Indeed, I must admit, confess that the group is not headed as a function of operational profitability. We are a company of growth and ambition and creation. At the end of the half year or the year, we do the accounts. Now, obviously, we had H1, which was incredible. All our products have sold. Currencies went in the right direction. The activity in our stores was quite incredible, which in a company where there are a certain number of fixed costs, has a leverage effect on profitability. This must not prevent us from investing, continue to progress and plant the trees of tomorrow. That is essential indeed.
Concerning the resellers, I think that, and the parallel market that you mentioned, we don't have any relations with them and, all the more, so since it's to the detriment of our normal customers that come to the stores. Now, obviously, our role and you know that the demand for leather, for example, since my childhood, for the last 20, 30 years, has always been higher than the supply. We've been confronted to this for many years. Our role is to receive as many customers as possible to propose to them our products and that some are greedy for gains as old as the world may be, it's a pity.
This is not something that is encouraged by Hermès, and this is in fact something that we don't approve of, because it obliges real customers to buy products that are much more costly in other situations and sometimes mixed with counterfeited products. This is something that we don't at all support, knowing that there is a certain hypocrisy in the second-hand when it's products that are, you know, almost new.
Thank you.
We have another question from Anne-Laure Bismuth.
Another question, Anne-Laure Bismuth from HSBC. Go ahead.
Hello, good morning. I've got two questions. First of all, profitability, current consensus for the full year margin. Do you think this is too high? Changes in the margin in H2 would be around 32%. Let's make sure we're all on the same page. Good to be a stable margin or an improvement in margin in H2. Second question on the recovery. China, June, could you flesh this out? You were seeing double-digit growth in June in China, right? Thank you.
The recovery in China. To talk about profitability first. Profitability, I mentioned the four main points, boosting of our investments, our communication spend being increased, wage effects impacting the second half, but we're keeping our ambitious objective for the full year. Regarding China.
Listen, I'm not gonna exactly answer your question, but I suspect you won't be disappointed. At any rate, regarding China, in the first half, we're growing for the period. To achieve the growth, yes, it's true, in June, there was double-digit growth.
Merci. Thank you.
Next question comes from Zuzanna Pusz from UBS. You have the floor.
Sorry, it will be in English.
Go ahead.
First of all, on your communication spend, I'm just a little bit, well, maybe confused or maybe if you could give us an update. What is now your sort of targeted communication spend? I remember historically, that's been roughly between 5%-5.2% of sales. My understanding was that last year, maybe, you know, in H1, the demand surprised you positively, so the communication spend was a little bit lower, and then you caught up in H2. Now in H1, once again, the communication spend seems lower, I think roughly 3.6% of sales.
It would be just useful to know what is really your new targeted communication spend so that it helps us a little bit more to model our margins going forward. Secondly, would you be able to tell us what sort of, you know, were the gross margin drivers in a little bit more detail, maybe any impact from FX next? Anything you could share would be very helpful also to give an idea of how we should think of the gross margin in H2. Finally, do you any update on pricing for the second half of the year?
I mean, I know you have a specific strategy of trying to price your products in line with the inflation you're seeing. This year, I believe pricing was roughly 2.5% globally, but inflation continues to surprise to the upside. If you could share any details on pricing for the remainder of the year, that would be very helpful. Thank you.
Okay. Maybe I will answer communication and pricing, and Éric, you can take the broad driver after.
Yes.
Okay. Communication. Well, let's put that in a broad picture. For us, communication, let's say there is two types of communication. There is the events where we pamper our clients globally or new, and there is the media spending. I will say that the specificity of Hermès compared to the rest of the industry is that we have for what we call the events a very large share compared to the media, compared to the rest of the industry, where globally it's more media and less events. Which means that we are quite impacted in our budget by closings and sanitary procedures. That's why you can see that you can have a variation.
I don't think we are missing any budget on communication because we are doing everything that we want on that. The fluctuation in terms of percentage are more because we had higher sales than projected sometimes or better results or sometimes closing of a few events for other reasons. We are totally following the trend that we have on communication. We adapted it, of course, taking into account the evolution. We are spending now more on digital communication than before. That is very important that we keep this two legs of strong events and also the media spending. You know, pricing. Thank you for remembering that we are increasing the pricing of our cost of goods.
I honestly think that our products are so incredible and incredibly made, that we don't need to have, let's say, a luxury image by increasing without grounds our prices, even if we can. Regarding that, we decided to increase the price by 3.5% this year to take into account the inflationary pressure. It will go up to 4% because we increase a little bit on first of July , jewelry and watches because of the price of gold and other metals mainly. We'll be able to pass the inflationary pressure in 2023 because we have the chance to, I think, have been always constant and coherent in this pricing policy.
Regarding the evolution of the gross margin, we have, in fact, four main drivers. The first one is, as you know, the currency impact, where we expect a slight negative impact due to our hedging positions. It was a fact in the first semester. Also regarding the currency impact, we have the translation impact, which is quite difficult to anticipate and will depend on the evolution of the euro-dollar parity. The second one is related to the absorption of our fixed indirect production cost. As you know, it will depend on the level of sales of the second part of the year. Finally, we have also the productivity of our workshops, where we had in the first semester a good productivity.
We assume, depending on sanitary constraints we could have, but we assume to maintain at a good level. Maybe the last point, of course, is the cost of labor and the cost of materials. We mentioned before the decision we have taken to protect our employees. This cost will of course impact the second part of the year.
Thank you, Éric.
Thank you. Just to follow up, clarify. So on communication spend is roughly 5%-5.2% of sales still your sort of target that you, the range you in normal circumstances would try to stick to. On gross margin, that was very helpful. Can you tell us what were roughly the drivers of the slight. I had expected slightly bigger drop in gross margin in H1, so that's why I would be curious to know what were exactly the drivers. You know, what effect the biggest, let's say, negative, anything incremental for H1 specifically. Thank you.
The biggest impact for the first half was the currency impact, both hedging and conversion. It was, as I've mentioned before, offset by a better productivity this year. In the first semester last year, we were impacted by sanitary measures. Also, the collections were very successful, and we had some sell-through rates which were exceptionally high in the first semester.
Yeah, I think I mean I cannot comment too much about your own calculation. I'm sorry. What I will say is that genuinely, I don't know where did you put the turnover of the group. If we have a higher turnover because we have a lot of fixed costs, there is always a leverage effect, which is you know if you are not right on the turnover which have an increased effect on the profitability of the group. I think that's the main driver.
What has been incredible during this semester is the success of our collection, which means that what we produce is sold and there is no constitution of stock, which is not exactly a normal situation when you are a growing company and with regard to your working capital. I think the scope of the success has been extraordinary, which leads to an extraordinary profitability in all the senses that you can take it extraordinarily emotionally also. That's for it. For the communication, it's around that, probably a little bit below, but it's a fair assumption.
Excellent. Thank you.
Thank you.
We have another question from Edouard Aubin, Morgan Stanley. You have the floor.
Yes. Good morning, everyone. Two questions. Firstly, on the same page 2021, you talked to us about revenue growth for non-leather goods métiers would be capacity limited due to production constraints that you had in several métiers. Production constraints, of course, aren't as strong there as for leather goods. Nonetheless, you did mention this. You disclosed growth on the order of 30%. That was what you reported, 30% revenue growth in those categories in Q2. Theoretically, what kind of growth might you continue reporting? What are production constraints in upcoming years in those other métiers? That was the first question. Second question on commercial density. Revenue per square meter is very, very high, over EUR 3,000 per square meter per annum. Does this harm customer experience? Should you revise your store openings plan?
Could you give us an order of magnitude in terms of growth in square meters? You're opening stores that tend to be bigger and bigger. Could you give us orders of magnitude, additional square meters this year and next? Last point, clarification, Axel, on China. You indicated double-digit growth in June. Is there any reason to think this might slow down in July with this, some pent-up spending in June?
Okay, you got three questions about the métiers. I have to confess, I can't always perfectly answer, I'm sorry for this, the questions you have on our capacity since it's not exactly how we tackle this. Let me say that I'm extremely proud at the leather results. For quite some time, demand has gone beyond supply. We've continued opening leather sites, five, you know, underway right now over the next few years.
It's like the Hermès Swiss watch. We get 10% growth per annum this way. The size is amazing, so we can say that sometimes we read some analyst notes. They talk about almost a conspiracy that we don't produce on purpose. That's not true. We do produce with one single idea in mind, quality. If we can't achieve the quality due to lacking know-how, due to lacking beauty of materials, I prefer not to produce. That's crystal clear. There may be bottlenecks because we haven't received a certain bit of leather or haven't completed some training sessions or haven't found the right supplier in some of the métiers that is up to requisite quality. I cannot give you a theoretical growth rate. We can say this is a period when the strategy we wanted is coming to fruition.
Having growth drivers in other métiers aside from leather, which are successful, and each of them taking their own position, becoming leaders in their own business field. That's wonderful. Think of jewelry, think of watches, think of beauty products, major results. Home department. Here as well, we apply the same strategy. We try to produce to cover demand, but always being uncompromising on authenticity and being very demanding of quality. To make an Hermès bag, it takes 15 hours of manual labor done by hand. We're not investing in machinery or cutting corners or what have you. We are keeping that quality. That's what helps us be resilient, that's what gives us our strength, and that's some of the magic of Hermès products. Right now, I hope, maybe sometimes things will differ, but I hope that other métiers will continue growing even faster than leather.
We can see there is demand out there. Unfortunately, our experience in managing leather demand has shown that it can also branch out at other métiers where sometimes demand grows faster than supply. Our imperative is always our quest for quality. Quality isn't just the quality of the finished product, the quality of the manufacturing process, quality of the material, quality of the relationship involved in selling the product. I would say that this is absolutely essential. I would to add to that first point, all these métiers, non-leather métiers, are developing value strategies. They're developing ever more pricey products. In the home department, in jewelry, and elsewhere, we're seeing that strategy. It's an important point.
Yes. Thank you, Éric. Next, on commercial development.
It's entirely true that one of the specific things we've seen in the last year or two. Well, it's not just that our great customers have continued coming back and helping be resilient. In addition, we've seen many, many new customers, often through digital, but also through our stores to begin with. I know that you looked very carefully. Since I've been CEO, we've almost not increased the number of stores. We've enlarged stores, we've included ever more products in métiers in our stores, which has fueled growth, but we haven't actually increased the number of stores. We've actually reduced by around 10 number of stores overall. Aside from all these points, the slight change in Hermès, sorry, slight, with Florian Craen, we realized, and it's not to fuel growth, it's for the sake of customer service.
We wanted to increase our stores in Asia and the Americas, opening in new cities. That's always been a strategy, such as in China. This year, we opened our first store in Henan. Henan, one of the provinces in China. Also the Americas, either opening in new cities or sometimes we're doubling the size of certain stores in certain cities. Our idea is to increase scope slightly, very carefully and reasonably so. For instance, we already started this year. We've got an opening in Austin, another store in Florida, Naples, Florida, also in China, elsewhere in Asia, in Pangyo, Korea. We'll have a new store in Zhengzhou, China. Moderate, but nonetheless, a slight change. Shifts in stores, opening in new cities, attracting new customers in some, sometimes smaller cities. Thank you.
Sur la Chine.
On China, we've just opened. For the moment, we don't see any changes compared to the month. In July, we don't see any changes compared to what we were able to see, knowing that, you know, as you know, when we open, there's always a very strong demand for bags in leather, which have not been sold during the closure. However, like everybody, we are somewhat penalized by the closure of Macau as well, for health reasons, sanitary reasons, which has had a very good result. I'd like to emphasize the very good results of Hong Kong as well, which thanks to our strong anchoring with the local Hong Kong customers, has allowed us to remain in a sustained manner despite the reduction in tourism flows. July, yes, we're confident, yes.
We have another question from Chiara Battistini, J.P. Morgan.
Good morning. Thank you. I'll switch to English, please. I just have one last actually on tourism and tourist flows in Europe. Historically, you've been more reliant on domestic spend versus your peers. Now we are seeing tourist flows coming back to Europe. I was wondering whether you're seeing now a big pickup in tourist spend also on your side from the U.S. and from Middle East, and if you see different trends from these consumers as they travel and they buy Hermès, maybe because Hermès in the meantime has strengthened in terms of brand in brand perception locally. Also, I was wondering whether you could help us understand where tourist spend in Europe stands today versus 2019 levels, please. Thank you.
Okay. Well, you know, I mean, it's one of our strengths is to be strong on local clientele. I think that one of our specificity, but that doesn't mean that we don't sell gladly to tourists when they come. It's just that all our stores are made for local client and are there to welcome all, everybody and tourists included. I think there is different trend in the tourism that you can see now. I will say there is a trend of leisure tourism and to be glad to travel again worldwide and with less health restriction. We've seen tourism going from the Middle East to Europe. South Asia also is traveling again very nicely.
The American were coming back. I will say in most of the European country and the Middle East, that that's true, because there is tourists from the Middle East, but there are also tourists from South Asia or there who are traveling to the Middle East also. The Middle East is also sending tourists and receiving tourists. I will say Italy is doing incredibly well. France with our flagship are doing very well. There is a second layer, I will say, of this tourism is the exchange rate.
All the countries which are a little bit linked to the U.S. are also traveling to Europe to benefit from the euro-dollar conversion, which is probably also an increase of the spending of the tourists globally, and we are probably part of it also. So tourism has been a little bit more buoyant, and it will change, I think, depending also on the currency, on the currency effect. The second question on. That was it for tourism?
No, just a follow-up within the tourism. I was wondering how much or if you can give us any color on how much of your European sales in H1 or Q2 were linked to tourist sales and how that compares to 2019, please?
No. I don't have it, I have to say. It remains strongly on the local client still very much. We are happy to see tourism getting again. I will say it's not. It's really fundamentally a local spending. Where we hope that will be and we need to have the reopening of Asia also a little bit more is we hope that the travel retail, which has been deeply impacted by COVID-19 and is not yet probably one of the only.
Part, which is not at the level what it used to be. For example, Hong Kong airport, which will not be open. We hope that we'll be able, with these tourists, to open again fully our travel retail network.
Great. Thank you.
Thank you.
Our next question from Antoine Belge, BNP Paribas. Go ahead.
Good morning, Antoine. Two brief questions. You talked about production constraints in H1, 12% growth for leather, 8.5% growth in Q2. There's slowdown in demand. Would you be able to achieve 6%-7% volume growth in the second half? Second question, you talked about prices and your usual policy on prices. There are also currency impacts, though. I believe today a product that costs EUR 100 in Paris costs $135 in the U.S. The premium's usually around 15%, though. Do you think that you can continue with this difference? Or will you need to do something regarding price increases in 2023 that might not be harmonized across geographies, maybe just in Europe? Or are you considering cutting prices in the U.S.? Thank you.
Yes.
Well, let me say that on leather, if you don't mind my saying so. We're not necessarily talking about the same thing. You're talking about retail sales, and we often talk about production. On production, we've got a plan well established. It's basically sort of a five-year plan, 6%-7% growth. Thanks to our team efforts, and some of your notes don't thank the teams enough, to my mind, so I'd like to thank them on your behalf. We do manage to achieve some pretty more or less growth. But again, we are artisans. We are beings. There can sometimes be a big I don't know, stomach flu epidemic that leads to employees being off and slight reductions in sales and in production. But it's all about quality of leather and quality of materials.
Next, retail sales also fluctuate. It's difficult for me to agree with you quarter by quarter. That's not our target. There can be variations. Sometimes China may close, hard hit in April, didn't sell leather as usual. Sometimes there's a replenishment of inventory to serve customers. It's all about customer service during the Chinese New Year. Same thing during the Christmas period here. For you. I look at it on an annual basis rather than on a quarterly basis using cutoffs, and especially if you consider our COVID experience, where there was a real, mixed bag of experiences in different geographies. In line in leather, as you said, 6%-7% volume growth, then price effect and value effects, difficult to quantify. A Birkin bag, well, size 25, not the same price as size 35.
Lots of differences that have to be factored in quarter by quarter. On prices, you're right. Two points: inflation, cost of materials, and then wages. Because twice we've increased 100 EUR wages for employees, plus their 3,000 EUR bonuses. This will be reflected in our prices. There's a currency effect. You saw it in the H1 results, which helps us out. It's fairly infrequent for us to do price increases unilaterally, globally. They're always targeted. We'll take in all the factors into account when we set them for 2022. It'll depend on spot considerations as well, currency spot prices in 2023, and we'll look at your forecast carefully when we do our annual budget. To answer your last suggestion, almost never do we. You should never say never, but almost never do we cut prices at Hermès.
Thank you very much.
David Daoud, CIC, you have the floor.
Bonjour.
Thanks for taking my question.
Two questions for me. The first one, to come back to the record profitability of H1. You managed to attain a level of record profitability while the growth of leather is weaker. We know that in your métier, the leather is the métier which has the margins. For you, on the contrary, the margins of your 16 métiers are more homogeneous and close to the average, and namely that of leather. Or do we see here a strong progression of profitability of certain years, namely linked to growth, but also this strategy of valuation that Éric mentioned a while ago? That's the first point.
The second question to come to China to talk of a strong rebound since June, can we then consider that growth over the last two months, or rather since June, is equal or higher than that of Q1, given the catching up? Just to have an idea of the momentum, the dynamic on the market.
On your first question, profitability. Our target is to see convergence of profitability of all métiers, to bring them fairly uniform. You know, in fashion, métiers ready, men and women's ready-to-wear fashion accessories. One of the points in the equation is sell-through rates. These are difficult to anticipate. In forecasting prices, we try to have gross margins that are fairly uniform across the board for the métiers.
Thank you, Éric, for this answer. I've tried to make it. Often we try between the métiers to have the same margin, whatever be the métier, in order that there's not much impact on the profitability of the group when some métiers are more popular than others. Similarly, I specified that we have the same margin of our products within the métiers, whatever be their desirability. It can be different from other companies that use marketing, where you have same margin, whether it's a very desirable or you have one that stays on the shelf. There's no special profitable margin depending on its popularity. It depends on the production cost.
Coming to China, I won't be able to answer to give you a normality in a world that is not very normal. What is sure is that we've had a very good Chinese New Year in January, which was extraordinary, and that we have a very good rebound after the opening that corresponds also to two things. One is catching up, because we have inventory and also because there's a demand that continues to be very strong from our Chinese customers for our products. So there's a conjunction of the two, and I think the most important point, for me at least, is the attractiveness that Hermès continues to have and the speed with which it shows. Then the amplitude will be assessed according to local events and different health pressures.
You've seen that in Wuhan, there's some lockdown, et cetera. I think this is the last question. First of all, I'd like to thank you all very much for your questions. I would like to be humble in the face of the results for which I congratulate the teams, and which high in a complex and complicated world. Hence your questions on all the macroeconomic uncertainties on China and on the duration of this. I think we have to get used to a world which was not the case before, a world which is fragmented. Fragmented in three ways. Fragmented in the globalization. You've got growth areas which are different.
One in Asia, in the larger sense of the term, which is quite phenomenal and disconnected maybe from the historical ones from the other areas. Interesting to see results of Australia, Thailand, Korea, Japan, West Coast of the U.S., an economy turned towards the Pacific, which works a lot with its internal market. A U.S. area which has a certain fragmentation between West Coast, East Coast and the center. The three are in progression, this case in point, but with different momentum. In European area, which is making up for lost time, but which may have more macro difficulties in the medium term. This fragmentation is something that we'll have to live with, you know, time-wise. I'm sorry for certain models. They're not linear as we see them.
All of a sudden, Shanghai has to close down, not a 5% drop, because there's a demography. You can have quarter by quarter ups and downs. There's a temporary fragmentation which is less linear, which is exponential. There's a fragmentation within our countries. Very clearly between different realities as a function of whether you're in a dynamic economy or whether you are in a more difficult sector. I think we'll have to learn to live with this fragmentation, which will allow to show certain corporate organizations different from others. Ours will be based on three things at least, I hope so. The long term. We take long-term decisions together with our employees.
Characteristic of Hermès is that we have very few departures, and we invest in the long term in employees, and we take a vision which is long-term. Second is our resilience. This is important for us to have enough leeway, to have cash treasury. The last, which I hope I have communicated to you is the authenticity. There's a certain authenticity of our prices, of our mode of manufacturing, and a certain authenticity of our communication. We try to present ourselves as we are. Dealing with the situation with confidence, because there's good news in the world as well, certain successes, and with caution in the face of uncertainties which are there. You know, we take all of this with modesty.
We are producers of handbags and carriages, which are there to make our customers dream in the four corners of the world. We are also in the field of imagination and pleasure, which is never guaranteed. A big thank you to all of you to have listened to us.