Hermès: How French Luxury Lagged 19 Points Behind the CAC 40 in 2025

Three Major Shocks in a Year of Decoupling

Hermès' stock reached a historic peak of nearly 2,955 euros in February 2025 amid ongoing enthusiasm for luxury brands. However, the excitement was short-lived. Starting in January, the market initially reacted positively, with the stock jumping 12.84% from January 14 to 24, climbing from 2,359 to 2,662 euros. Then came the first setback. Hermès disappointed on April 17 with sales growth of 7.2% at constant exchange rates, totaling 4.13 billion euros, falling short of analysts' higher expectations. The stock dropped by 11.92% from April 2 to April 7 and recorded the steepest decline in the CAC 40 on April 17. The disappointment was largely focused on the Asia-Pacific region, where Hermès' revenues increased by only 1% excluding currency effects, marking a slowdown after a dynamic end to 2024. The summer brought the most severe downturn. On July 30, Hermès shares fell 4%, showing the sharpest decline in the CAC 40, followed by a plunge of 12.62% in just four days at the end of July and beginning of August, dropping from 2,378 to 2,078 euros. The stock was heavily impacted by uncertain outlooks in the Chinese market, as the luxury sector as a whole faced a worsening environment. These three phases, concentrated in the first half and the summer, explain the significant decoupling from the CAC 40, which showed more resilience.

Nine months of growth and 41% margins, but China weighs heavily

Fundamentally, Hermès has not lost any of its strength. For the first nine months of the year, consolidated revenue reached 11.9 billion euros, with a 9% increase at constant exchange rates and 6% at current exchange rates. The operating margin stood at 41.4% and the net margin at 28%, levels that continue to set the group apart in the luxury sector. In the third quarter, Hermès reported sales of 3.9 billion euros, up 10% at constant exchange rates. All geographic regions contributed to this growth, with sales rising 15% in Japan, 13% in the Americas, 12% in Europe excluding France, and 4% in Asia excluding Japan. The latter region, however, is drawing much scrutiny. The Chief Financial Officer, Eric de Halgouët, mentioned a slight improvement in China during the third quarter compared to the previous one, with signs of stabilization in real estate in major cities. However, caution is still advised. The group issues no numerical guidance, only reaffirming its ambitious medium-term growth objective without specifying a range. This cautious approach reflects an uncertain environment, marked by currency fluctuations that negatively impacted the cumulative revenue by 254 million euros. On the product side, leather goods remain the primary driver, with a 13% growth over nine months, while watches and beauty products saw a temporary decline due to challenging comparative bases. The strategy remains unchanged: continue expanding production capacities with the opening of new leather workshops, develop the distribution network selectively, and maintain exclusivity.

2026 characterized by caution: analysts divided, valuation strained

If consensus is to be believed, the path to revaluation might be winding.
Of the 21 analysts tracking the stock, 7 recommend buying, 4 suggest accumulating, and 8 advise holding, with an average target set at 2,423.43 euros.
Compared to the closing price of 2,122 euros, this implies an upside potential of about 14%. However, this average outlook conceals significant divergences: some analysts target 2,800 euros, while others believe the stock could fall to 1,580 euros.
The main point of contention remains valuation.
The stock is trading at 44.1 times estimated earnings for 2026, a level considered hard to justify without double-digit growth. Barclays downgraded its recommendation to equal weight from overweight, moving from buy to neutral, believing the group's historical outperformance might diminish in 2026 with an industry normalization.
In contrast, other firms remain confident, highlighting Hermès' integrated model resilience, its ability to implement regular price increases, and the exceptional loyalty of its customer base.
Prospects for 2026 will largely depend on three variables: the trend in Chinese demand, the group's ability to accelerate growth outside Asia, and the stabilization of exchange rates. In an optimistic scenario, a moderate recovery in the Chinese market coupled with continued upgrading could allow the stock to regain some lost ground.
In a more cautious scenario, the current valuation may remain under pressure until organic growth accelerates convincingly. Consensus reflects this uncertainty: a majority of analysts prefer holding rather than increasing, and the potential for upside remains contingent on a sustainable improvement in the macroeconomic and sector context.