Hermès remains head and shoulders above the rest

Despite a cold reception from the market, Hermès' quarterly results are impressive in all respects.

The storied house of Rue du Faubourg-Saint-Honoré stands alone in resisting the broader downturn currently dogging the luxury sector. While sales in the Middle East - and to some extent France - have been disrupted by regional geopolitical tensions, all other geographical regions are posting insolent growth.

Special mention should go to Japan, where sales rose by 10%, and particularly the Americas, where Hermès has now achieved the status of a cult brand. The group delivered 17% sales growth in Q1 2026, following an already exceptional 2025.

All operational segments are performing well, except watchmaking, where the sharp decline following the mania of recent years continues. Hermès is nevertheless maintaining its expansion efforts in this field, where it likely holds a stronger hand than certain trendy brands lacking real substance.

On a consolidated basis, revenue increased by 5.6% at constant exchange rates, although slipped by 1% at current rates, following a highly unfavorable currency effect that cost the group a staggering €290m.

That said, Hermès' resilience is far more polished than that of the behemoth LVMH, whose sales grew by only 1% at constant rates and fell by 6% at current rates, notably penalized by a significantly weaker commercial performance in North America.

LVMH's performance is also hampered by a critical decline in its highly strategic Fashion & Leather Goods segment - which accounts for nearly half of its revenue - whereas at Hermès, sales in this segment grew by a further 9% over the first three months of the year.

This morning, the market severely punished the group's earnings release, sending its market capitalization back below the symbolic threshold of 40x earnings. This level roughly aligns with its historical average when adjusted for the speculative euphoria seen during the pandemic.

A further drop toward a floor of 30x earnings - Hermès' historical valuation floor, reached only twice in 20 years - would be a powerful signal. Over two decades, the group led by Axel Dumas has increased its dividend per share eighteenfold, in addition to paying out generous special dividends on five occasions.