Shares of French luxury powerhouse Hermès took a surprising tumble on July 30, 2025, despite reporting a robust 9% rise in quarterly sales, underscoring the complex dynamics at play in the luxury goods market today.
The maker of the iconic Birkin bag, long celebrated for its ability to defy industry downturns, saw its shares fall as much as 4.7%—the steepest drop since May—bringing its year-to-date gains down to just 2.4%. This contrasts sharply with the more than 25% slump experienced by rival LVMH over the same period, highlighting Hermès’s relative resilience but also the market’s growing concerns about its valuation.
Hermès announced that its sales for the second quarter ending June 30 reached €3.9 billion ($4.50 billion), a 9% increase at constant currency rates. This performance was broadly in line with analysts’ expectations, who had forecast a 10% rise. The surge was largely driven by the continued strong demand for its coveted leather goods, especially the Birkin, Constance, and Kelly handbags, which remain highly sought-after despite broader economic headwinds.
However, not all segments of Hermès’s business enjoyed the same momentum. Growth in its smaller fashion and silk divisions slowed, and sales in perfume and beauty products contracted during the quarter. This mixed performance signals that while Hermès’s flagship leather goods continue to shine, the luxury sector’s overall softness is beginning to ripple through the company.
Executive Chairman Axel Dumas addressed these nuances candidly during a call with journalists. He pointed out a noticeable dip in demand from first-time clients, a key indicator of future growth potential. Moreover, Dumas confirmed that after implementing a general 7% price increase globally and an additional 5% hike in the United States earlier this year, Hermès does not currently plan further price rises in 2025.
These price adjustments are particularly significant in the context of tariffs. The company expects that its recent price hikes will effectively offset the 15% tariff rate imposed under agreements between the Trump administration and the European Union. Dumas noted, "These rises would probably suffice to offset the 15% tariff rate agreed between the Trump administration and the EU," although the company is still awaiting details on how the tariff will be applied in practice.
A key part of Hermès’s strategy remains its tight control over production. The company raises output at a steady pace of about 6% to 7% annually, a deliberate move that maintains exclusivity but also frustrates some shoppers who face long wait times for their coveted handbags. This approach has helped Hermès buck the industry-wide slowdown, unlike other luxury giants such as Chanel, Gucci (under Kering), and LVMH-owned Louis Vuitton and Dior, which have been grappling with declining sales.
The luxury market’s challenges are further compounded by regional shifts in demand. A prolonged slump in China has forced European luxury brands to pivot their focus toward the United States. Yet, even in the U.S., demand has been volatile, affected by a shaky stock market and fragile consumer confidence. On this front, Dumas remained cautiously optimistic, stating, "I don't see any fundamental changes in the sales climate in China at the moment," and emphasizing that he still sees China’s long-term potential as intact, with no structural changes in consumer sentiment.
Industry consultancy Bain forecasts a downturn for global luxury goods sales in 2025, predicting a fall of between 2% and 5% following a 1% decline in 2024. This outlook underscores the broader pressures facing the sector, even as Hermès manages to outperform many of its rivals.
Despite these headwinds, Hermès’s shares have managed a modest 2% gain since the start of 2025, outperforming many competitors including Cartier-owner Richemont, which has remained flat despite a surge in high-end jewelry sales.
The mixed signals from Hermès’s latest earnings and stock performance highlight the delicate balance luxury brands must strike in today’s market. While Hermès’s exclusive products and disciplined production strategy continue to drive sales growth, concerns about valuation and broader economic uncertainties weigh heavily on investor sentiment.
As the luxury sector navigates these choppy waters, Hermès’s ability to maintain its allure among affluent consumers, manage pricing and tariffs, and adapt to shifting regional demands will be critical. The company’s experience so far suggests resilience, but the recent share price dip serves as a reminder that even the most prestigious brands are not immune to the complexities of the global economy.
