French luxury brand Hermès released its financial report for the first quarter of 2025, showing lower-than-expected performance due to slowing demand in the Chinese market. This indicates that even the most resilient luxury brands cannot fully withstand the impact of the cooling Chinese economy.
According to the statement released by the company on Thursday, sales in the Asia-Pacific region (excluding Japan) only increased by 1.2% at fixed exchange rates, far below the analysts’ estimated 4%. The total revenue reached 4.1 billion euros (approximately 4.7 billion US dollars), with a year-on-year increase of 7.2%, slightly below expectations. Following the announcement, its stock price briefly dropped by 4.2%, but later recovered most of the decline.
Hermès Chief Financial Officer Eric du Halgouet pointed out that the decrease in foot traffic at Chinese stores due to a sluggish real estate market, coupled with a high base period last year, led to a weak growth. Meanwhile, US President Trump imposed a 10% tariff on EU goods and temporarily postponed the implementation of a 20% retaliatory tariff for 90 days, adding pressure to the global luxury goods industry.
To cope with the new tariffs, Hermès will raise prices for products in the US market starting from May 1, covering all categories, with no impact on other regions. Du Halgouet emphasized that they have not yet observed any changes in demand in the US.
Nevertheless, Hermès still shows relatively stable prospects globally. With a limited production model and support from affluent clientele, the company maintains strong pricing power and a continuous waiting list for sought-after bags like the Birkin and Kelly. A Birkin bag in Paris is priced around 10,000 euros, with even higher prices in the second-hand market.
In the first quarter, Hermès performed well in the American market with an 11% annual increase, accounting for nearly 17% of total revenue. All markets showed positive growth, with overall revenue increasing by 7%, slightly below the market’s expectations of 8% to 9% and lower than the 17.6% in the fourth quarter of last year.
Meanwhile, competitor LVMH unexpectedly announced a decrease in revenue for its fashion and leather goods division this week, with a significant 11% drop in the Asian region (including China), accounting for 30% of the group’s total revenue. In comparison, Hermès has a higher share of 48% in that region.
LVMH CEO Bernard Arnault admitted that the early 2025 situation was volatile, performing steadily until the end of February, but tariffs and geopolitical changes brought about impacts.
The disappointing performance of LVMH further boosted Hermès’ stock price and market value. In February, Hermès’ market value briefly surpassed 300 billion euros.
Du Halgouet stated, “During market turbulence, Hermès’ market value reflects investors’ trust and proves the brand’s status as a safe haven.”
Despite Hermès’ annual revenue being less than a fifth of LVMH, its steady strategy and market confidence made the company briefly surpass LVMH this week on April 15, becoming the world’s most valuable luxury goods company. However, on Thursday morning, the stock price fell by 1.3%, with a market value of 244.5 billion euros, almost on par with LVMH’s 245.7 billion euros.
(This article references reports from Bloomberg and CNBC)