Hermes records lower-than-expected growth – China business remains challenging

Background: Weakening Chinese market

Among European stock exchanges, the shares reacted with moderate price movements. The news was closely noted by market participants on the Euronext, where Hermes is listed. The share's valuation remains closely linked to developments in the Chinese market.

The group's management had recently emphasized that the brand still sees long-term potential in China. In the short term, however, the environment remains challenging. Investments in the store network and digital sales channels are intended to strengthen the company's presence in the region.

Developments in Asia and Japan

The luxury market in Japan has also recently shown an uneven picture. While demand for classic leather goods remained stable, the fashion accessories segment developed more cautiously. This mix of stability and restraint also reflects the broader picture at Hermes in Asia.

Comparable companies such as the Swiss insurer and asset manager Swiss Life are also closely monitoring consumer trends in Asia, as the region remains a key growth market for many European companies. Consumer sentiment is considered an important leading indicator.

Outlook for the year-end business

The weakness in China is not an isolated case: Other luxury and industrial groups, including ABB, are also reporting subdued momentum in the region. The breadth of the impact points to structural factors that extend beyond individual brands.

It remains to be seen in the coming quarters whether the traditionally strong second half of the year – with holidays and the shopping season – can give Hermes' business new momentum. Observers are focusing primarily on sales figures during the Chinese New Year business.

If demand in China does not recover, this could place further pressure on the group's margin development. The fixed-cost structure in the luxury segment is considered relatively rigid, meaning fluctuations in volume can immediately affect the result.