Hermès reported disappointing sales in the third quarter on sluggish demand in China, a sign the Birkin bag maker is succumbing to the spending curbs affecting shoppers there.
Revenue in the region that includes China, the luxury group's biggest market, flatlined at constant exchange rates, Hermès International SCA said Thursday. Analysts had expected growth of about 1.6%. The region generates around 42% of Hermès' total revenue.
The results “will likely make for a very painful day,” Jefferies analyst James Grzinic said in a note.
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Hermès shares dropped as much as 9% in Paris, the biggest decline since July. Their 41% slump so far this year puts them on track for the worst annual performance since the company listed in 1993.
Hopes for a luxury industry revival earlier this year have been dashed by weakness in China and the conflict in the Middle East, which disrupted shopping hubs such as Dubai. In China, a property crisis, struggling financial markets and an effort by authorities to tax offshore wealth have affected the richest clientele.
The persistent weakness in the country, once a driver of growth for luxury brands, is a worrying sign for rivals including Gucci owner Kering SA, which is due to report sales later Thursday. Rival LVMH Moët Hennessy Louis Vuitton SE last week reported a slump in China sales — worsened by a controversy at Louis Vuitton, its largest brand.
Until recent quarters, Hermès had been viewed as largely immune to the vagaries of luxury demand because it enjoyed long wait-lists for its most desired products. Now analysts are raising concerns about its ability to preserve that ultra-exclusive status, pointing to the easier availability of its coveted Birkin and Kelly handbags both in stores and on second-hand sales platforms.
Overall, Hermès sales rose 4.3% in the quarter, shy of estimates.
The results “are likely to raise questions around 2027 expectations and whether Hermès' increasing scale is changing the nature of its business model,” UBS analyst Zuzanna Pusz said in a note.
The luxury group is also dealing with the aftermath of weekend riots that shook France. Its store in Marseille was looted, and “won't reopen any time soon,” Chief Financial Officer Eric du Halgouët told reporters on a call.
Stores in Nantes, Lyon and on avenue George V in Paris, close to the Champs-Elysées, had windows broken by the rioters. Hermès has since beefed up security measures.
“It's too early today to assess whether this will have an impact on foreign tourist clientele in coming weeks,” the CFO added.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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