UPDATE 3-Hermes beats sales expectations, sees positive signs in China

Thanks to its ultra-wealthy clients and ‌large order backlog, the group has weathered a luxury sector slowdown better than most of its rivals, consistently increasing revenue while sales at other luxury groups, like LVMH and Kering , have been under pressure. "The group is going into 2026 with confidence," said CEO Axel Dumas, adding that this year's price ‌increases would be around 5-6%, down from a 6-7% rate in 2025, attributing the slower pace to currency shifts.

Hermes, whose handbags sell for $10,000 and more, on Thursday reported stronger than expected fourth-quarter revenue growth, lifted by strong sales in the United States and Japan. Thanks to its ultra-wealthy clients and ‌large order backlog, the group has weathered a luxury sector slowdown better than most of its rivals, consistently increasing revenue while sales at other luxury groups, like LVMH and Kering , have been under pressure.

"The group is going into 2026 with confidence," said CEO Axel Dumas, adding that this year's price ‌increases would be around 5-6%, down from a 6-7% rate in 2025, attributing the slower pace to currency shifts. Hermes shares rose on the ‌results, trading around 3% higher at 1515 GMT.

Chiara Battistini, luxury equity analyst at J.P. Morgan, said the price increases Hermes imposes on its customers are a key question for the company's growth outlook. Many of its rivals have put the brakes on price rises due to falling sales. Gucci owner Kering's CEO earlier this week said a price hike "bonanza" ⁠post-pandemic had ​contributed to the company's revenue slide.

Sales of ⁠products, including Birkin and Kelly bags, silk scarves and perfume, grew by 9.8% in the fourth quarter in currency-adjusted terms, compared to an analyst consensus compiled by Visible Alpha of ⁠8.4% growth. Sales in the Americas region, mainly the United States, rose by 12.1%, beating expectations of around 9%, while sales in Asia excluding Japan - a region ​mainly driven by China - grew 8%.

VALUATION OUTLIER With around 25,000 staff globally, family-controlled Hermes has become France's second-largest company by market capitalisation surpassed ⁠only by arch-rival LVMH, whose annual sales are more than four times bigger.

But trading at 45 times forward earnings according to LSEG data - almost twice the multiple of LVMH and Cartier-owner ⁠Richemont - ​Hermes' stock could come under pressure, some analysts say. POSITIVE SIGNS IN CHINA

In a call with analysts, Dumas said he was seeing positive signs in China, a major luxury market that has slowed significantly in the past few years due to the impact of a property crash ⁠on the country's economy. "I do not see the situation deteriorating," he said. "There are positive moves, in particular the way they are managing the property ⁠crisis."

Revenues in Hermes' leather division, which ⁠accounts for most of its profits, grew by 14.6% organically. Hermes' full-year operating profit came in at 6.57 billion euros ($7.79 billion), with a 41% profit margin, slightly ahead of estimates of a 40% margin. The company said ‌it would pay ‌a dividend of 18 euros per share.

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