“Luxury Turns Late-Cycle”: After LVMH Miss, Hermes Stumbles Too

The European luxury sector, tracked by Goldman via GSXELUXG, came under continued pressure on Thursday after French luxury giant Hermes added to the gloom with a disappointing Q1 earnings report, following LVMH Moet Hennessy’s shock results just a day earlier. Most notably, a slowdown in Chinese demand is rippling through the industry — prompting one Goldman analyst to warn: “Luxury is late cycle.”

Hermes’ first-quarter earnings report was mixed to say the least, with growth in Europe, Japan, and the Americas, but disappointing results in Asia and key segments like Watches and Perfumes.

Here’s a snapshot of the first quarter report with estimates provided by Bloomberg: 

Total sales growth: +7.2%, missed Bloomberg Consensus of +7.89%

Revenue: €4.13B, +8.5% y/y, just shy of €4.16B estimate

Segment Performance:

• Leather Goods: +10.0% (vs. est. +10.8%) — Slight miss, still strong double-digit growth

• Watches: -10.0% (vs. est. -3.9%) — Deep miss, weakest segment

• Perfumes: -0.5% (vs. est. +7.06%) — Sharp disappointment

• Silk & Textiles: +4.5% (vs. est. +3.64%) — Beat

• Ready-to-Wear & Fashion: +7.2% (vs. est. +9.34%) — Moderate miss

Regional Breakdown:

• France: +14.2% (vs. est. +10.3%) — Strong outperformance

• Europe (ex-France): +13.3% (vs. est. +13.1%) — In line

• Japan: +17.2% (vs. est. +12.7%) — Significant beat

• Asia Pacific: +1.2% (vs. est. +4.02%) — Weak

• Asia (total): +3.7% (vs. est. +5.39%) — Soft demand in China likely a drag

• Americas: +11.0% (vs. est. +8.55%) — Strong outperformance

Axel Dumas, Executive Chairman of Hermes, released comments about the challenging macroeconomic environment: 

“In a complex geopolitical and economic context, the house is strengthening its fundamentals more than ever: uncompromising quality, creativity at the heart of all development, and vertical integration, a guarantee of preserving unique savoir-faire. Despite a high comparison basis in the first quarter, the group achieved solid growth in sales, thanks to the trust of its customers and the commitment of the teams, whom I thank warmly.” 

Hermes’ uninspiring quarterly report builds on LVMH’s first-quarter results yesterday, which served as a luxury gut-check for the industry. The miss was broad-based across segments and regions, led by sliding demand in key markets, including China and the U.S. Fashion and Leather Goods—the group’s growth engine—also stumbled, signaling concerns about a wider slowdown in the high-end consumer space. 

“Magnitude Of Deterioration”: Wall Street Stunned By LVMH’s Earnings https://t.co/96uM1CoZQA

— zerohedge (@zerohedge) April 15, 2025

Commenting on Hermes, but more importantly, the broader industry, Goldman analyst Natasha de la Grense warned, “Luxury is a late cycle.” 

Here’s more from the analyst:

• The Luxury sector is failing to perform this morning (GSXELUXG flat) despite three relatively reassuring prints and watch exports in positive territory in March. We think this is partly a function of positioning (Hermes, Brunello and Moncler all consensus longs) but also reflects wariness around the forward.

• First the good news: Brunello was bang in line, while Moncler and Hermes beat in the areas of the business that usually matter most (Moncler brand retail, Hermes Leather Goods). All three said that they are not seeing a noticeable change in trend through April. And all three sounded relatively calm on the direct impact of tariffs – the message has unanimously been that there will be no change production footprints, strategy is unaltered (Moncler still sees the U.S. as a growth opportunity) and any price increases would take place in the U.S. in H2 (Brunello quantified this at 3-4% which feels manageable).

• However, feedback this morning is that Q1 is backward looking and Luxury is late cycle – people pretty much unanimously expect U.S. demand to deteriorate even if this is not happening just yet. Moncler acknowledged risks to U.S. underlying demand looking forwards. In addition, the misses in Hermes’ non-leather divisions has made some wonder if the business will be more cyclical than in the past as these categories have grown in the mix. Meanwhile, everyone understands that March Swiss Watch exports were helped by stocking up (exports to the US +14%) while other major markets were weak (China -12%).

• Big picture, the takeaway from this week is that the outperformers last year (high end, strong brand momo) are still putting up better growth. Coupled with some potential pull forward of demand in watches/jewellery, that does bode well I think for Richemont cFX. Interestingly, unlike Moncler/Hermes/Brunello, our data suggests Richemont is a consensus short (with bears worried about higher gold costs, CHF headwinds and management’s tone on outlook). That said, the other takeaway from reactions today is that the market doesn’t care too much about Q1 beats which don’t tell us anything about what’s to come.

• Bottom line: conviction levels low in this space right now. We are net sellers on the desk this morning. I haven’t changed my view that Hermes and Moncler are relatively better places to be but I still think the whole space is going down. On Hermes, I expect Leather to accelerate in Q2 (as supply constraints drop out) and note that anyone on a list for a bag is expected to spend on other product categories first. Beauty and Watches are small and can be quite volatile, relating to timing of shipments and launches – I’m not overly concerned about the misses here. Meanwhile at Moncler, the strong performance with the Chinese cluster really stands out and speaks to excellent brand momo. Moncler also accelerated in Japan which is impressive post LVMH comments. Pushback on Moncler this morning is we are now entering low seasonality for the business/stock – I wonder if that’s actually helpful to have a smaller proportion of FY sales vulnerable to near-term shocks to demand. Remain cautious on Kering and Burberry based on weak brand momo, more limited pricing power to pass on tariffs and idiosyncratic risks. On Kering, we still think FY25 consensus EBIT is too high and expect some comments on H1 margin outlook could drive further downgrades. On Burberry, we see negative read across from Moncler/LV comments on the South Korean cluster. I’m also concerned that the scarf/trench push will be less relevant into S/S months.

Commentary from other analysts:

Barclays (overweight)

• Hermes reported a slight miss on its first-quarter sales update, analyst Carole Madjo writes, though all regions saw robust growth

• Growth in its leather goods division should be driven by a price increase and volume contribution in 2025, so it should pick up throughout the year

CIC Market Solutions (neutral)

• Hermes saw a solid start to the year which confirms its status as a safe haven, says analyst David Da Maia

• Its unique status is “highly valuable” in a backdrop that has become very uncertain, and has been reflected in its premium to the luxury sector

Bernstein (outperform)

• Tough comparisons in China weigh heavily, but should get better as the year progresses, says analyst Luca Solca

• Category mix confirms a slower consumer demand environment; watches again are the weakest link in the Hermes lineup

Stifel (buy)

• Lighter-than-expected growth in Asia Pacific overshadowed solid growth in the Americas, France, Europe ex-France and Japan, writes analyst Rogerio Fujimori

• Share-price weakness offers opportunity to buy ahead of growth re-acceleration for leather goods in the second and third quarters

Citi (neutral)

• Hermes continues to outperform with resilient sales, says analyst Thomas Chauvet, noting continued double-digit growth in all regions but Asia ex-Japan

• Notes that U.S. tariffs will be fully offset with pricing from May 1

Jefferies (buy)

• Hermes’s first-quarter organic growth confirms the resilience of the group’s model, even if it may be slightly below buyside ambitions, says analyst James Grzinic

• The 2025 price rise in leather will have helped, but also provides a good sense for Hermes’s pricing power at a time when tariffs, as well as euro strength, are likely to represent mounting gross margin challenges

Bloomberg Intelligence

• Hermes’s 1% Asia Pacific-excluding-Japan sales gain in the first quarter dragged otherwise robust low double-digit constant currency growth elsewhere, writes analyst Deborah Aitken

• Slowed China store traffic in April could see more trimming to consensus

For the first time in decades, Hermes’s market cap exceeded LVMH’s this week.

The theme sticking here is Goldman’s “Luxury is late cycle.”