Hermès shares fell on Wednesday after the company reported a 9% rise in quarterly sales at constant currency rates, reaching 3.9 billion euros ($4.50 billion) for the second quarter ending in June. This figure was broadly in line with analysts' expectations for a 10% rise, but the slight miss and concerns over the broader luxury downturn, particularly in China, led to investor apprehension. Shares were down after the announcement.
The persistent slump in China has redirected the focus of European luxury brands towards the United States. However, demand in the US has also been inconsistent due to a volatile stock market and fragile consumer confidence. Bernstein analyst Luca Solca commented that this situation indicates the market remains challenging. Chinese official figures showed a 21.3% year-on-year decline in jewelry and gold sales in April 2026, further highlighting the sector's struggles in the region.
Despite the current challenges, Hermès CEO Axel Dumas expressed that he doesn't foresee any fundamental shifts in the sales climate in China, maintaining that the country's long-term potential remains intact. He acknowledged that the momentum seen a few years ago has not returned, but he expects demand to recover eventually. The company still managed a 5.2% sales increase at constant currency in the Asia-Pacific region, excluding Japan, demonstrating some resilience.
Avior Capital Markets lowered its price target for Hermès from 2,223.73 euros to 2,152.18 euros, though it maintained an 'outperform' rating. The new target suggests a theoretical upside of approximately 35% from the current price of around 1,590.50 euros. The broader luxury sector faces pressure due to weakened demand after a post-pandemic spending boom, with consumers, especially less affluent ones, opting to save rather than spend amid a difficult economic landscape. Meanwhile, the company maintained its medium-term revenue growth target at constant exchange rates, acknowledging an uncertain economic and geopolitical context.
