Quick overview

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Investors were disappointed when sales growth in Hermes’  leather unit fell just short of expectations.  The company’s shares dropped as much as 5% in early Paris trading following Hermes International SCA’s announcement that revenue at the company’s primary profit-generating unit increased 13.3 percent, which was marginally less than the 13.8 percent analysts had predicted.

 

Piral Dadhania, an analyst at RBC Capital Markets, wrote in a note that “shares might be under pressure near term, given the slight miss in key leather goods division and elevated buy-side expectations reflecting more positive sentiment in luxury recently.”.

Investors were pleased and its shares rose after rival LVMH Moët Hennessy Louis Vuitton SE reported reassuring sales last week, raising expectations for the luxury sector. Despite concerns about tariffs and a global slowdown in demand for luxury goods, Hermes has been one of the most resilient luxury brands, increasing sales.

Since the early post-pandemic boom years, it has been immune to the whims of aspirational consumers who have reduced their spending thanks to its business strategy of keeping items scarce to drive demand. At constant exchange rates, the company’s third-quarter revenue increased by 9 points 6 percent overall.

The expansion occurred as the business continued to draw affluent customers who were prepared to spend money on its sought-after goods, particularly in the US. The region, which includes the US, exceeded expectations as revenue increased 14 percent in the quarter, allaying fears that the Trump administration’s tariffs would negatively impact consumption. Nothing has changed for Hermes.