Key facts
- Hermes reported second-quarter sales growth of 6.7% to €4.1 billion.
- The company's sales growth was in line with expectations.
- Hermes indicated that buying in China, its largest market, had not yet rebounded.
- Shares of the French luxury group fell 11% on the news.
- The leather goods division grew 10% in the quarter.
Hermes shares experienced a significant decline, dropping 11% after the luxury goods company reported second-quarter sales that met expectations but highlighted a lack of rebound in China, its most crucial market. The company's sales increased by 6.7% to €4.1 billion on a currency-adjusted basis, a slight improvement from the first quarter's 6% growth. Despite this, analysts noted that the relatively modest sales increase, coupled with the shares trading at a high multiple of 38 times earnings, was a concern for investors.
CEO Axel Dumas stated that while the Chinese market is stabilizing, a fundamental rebound has not yet been observed. He expressed satisfaction with the results given the uncertain global environment, including the impact of the Middle East conflict which had previously affected shopper appetite. Growth in the Asia-Pacific region, excluding Japan, remained steady at 2.5%. The leather goods division, a significant revenue driver for Hermes, grew by 10% in the quarter, slightly below analyst expectations.
Industry peers have shown mixed results, with LVMH reporting similarly muted performance, while Kering, the owner of Gucci, surprised the market with better-than-expected results, suggesting a potential turnaround. Hermes, known for its careful control over production and sales to maintain exclusivity, had previously weathered industry slowdowns and the COVID-19 crisis more resiliently than competitors.