French luxury group Hermès saw its shares fall after reporting a 9% rise in quarterly sales to $4.50 billion (3.9 billion euros) for the second quarter ending in June 2025. This growth was broadly in line with analysts' expectations for a 10% increase. The sales acceleration, up from a 7.2% increase in Q1, suggests that while Hermès is weathering the luxury slowdown better than many peers, it is not entirely immune.
The iconic Birkin, Constance, and Kelly bags continued to drive demand and shield the company from wider sector headwinds. However, slower growth was observed in Hermès's smaller fashion and silk divisions, and perfume and beauty sales contracted. Executive Chairman Axel Dumas noted weaker demand from first-time clients and stated there are no current plans for further price hikes.
While Hermès maintained overall strong growth, particularly in Q1, the second quarter showed some regional vulnerabilities. The Middle East, which was a strong performer in 2025, experienced a significant downturn in Q1 2026. Sales in this region fell 6% in currency-adjusted terms to $172 million (€160 million), down from $199 million (€185 million) in Q1 2025. CFO Eric du Halgouet attributed this to the "Iran war" and noted an "abrupt halt" in March, with luxury mall sales in Dubai and other Gulf hubs dropping by 40%. The conflict also impacted sales in Europe due to reduced tourist traffic from the Gulf region. Overall, Bernstein analyst Luca Solca characterized the situation as "a sign the market is staying difficult."
Despite the specific regional challenges, Hermès reported a 7.2% sales increase at constant exchange rates for Q1 2025, reaching $4.45 billion (€4.1 billion). All geographical areas showed growth in Q1 2025, with France up 14.2%, Europe (excluding France) up 12.7%, Japan up 17.9%, Americas up 13.3%, and the "Other" area (mainly Middle East) up 16.8%. However, Asia-Pacific (excluding Japan) showed a more modest 2.7% growth. The resilience of Hermès is often attributed to its focus on ultra-wealthy clientele, who are less affected by economic downturns, and its strategy of carefully controlling production to maintain exclusivity.
Looking at the first half of 2025, recurring operating profit climbed to $3.59 billion (€3.33 billion) from $3.40 billion (€3.15 billion) in the same period last year. The company maintained its medium-term growth targets. However, the Q1 2026 Middle East sales drop and its impact on first-quarter consolidated revenue, which fell 1% to $4.39 billion (€4.07 billion) from $4.13 billion (€4.13 billion) a year ago due to currency fluctuations, caused a 14% drop in Hermès shares, marking their lowest point in over three years.
