Why did the group still miss expectations when leather goods grew more than 10%?

  • Hermès reported third-quarter 2026 revenue of approximately 4.1 billion euros, up 4.3% year on year at constant exchange rates, below the market consensus of 5.3% and the second quarter’s 6.7%. Leather goods growth, however, accelerated from 10.2% in the second quarter to 10.8%, exceeding the consensus of 10.0%; non-leather goods businesses were the main drag on the group’s slowdown.
  • Non-leather goods businesses declined slightly overall. Ready-to-wear and accessories revenue fell 2.0%, against consensus expectations for growth of 2.3%. Ready-to-wear itself still grew, with fashion accessories the main drag; silk and textiles grew only 1.4%, also well below the consensus of 6.5%. Strength in leather goods did not extend to broader product demand.

Which regions are keeping growth expectations under pressure?

  • The Americas were the main source of the group’s deceleration from the second quarter: third-quarter growth at constant exchange rates fell from 13.7% to 8.8%, below the consensus of 11.0%. Asia-Pacific excluding Japan revenue was flat year on year, below the consensus of 1.5%, but Greater China still grew slightly; regional weakness cannot simply be described as a decline in China revenue.
  • Barclays attributes the slowdown mainly to demand issues among China’s aspirational luxury consumers. Hermès has less exposure to these customers than its peers, but its non-leather goods and Asia-Pacific performance shows it is still affected; Europe excluding France grew 9.5%, in line with consensus, showing that weakness did not occur simultaneously across all regions.

How do forecast cuts feed through to earnings?

  • Barclays cut its forecast for fourth-quarter group growth at constant exchange rates from 6.9% to 5.0%. Within that, leather goods was reduced by just 0.5 percentage points to 10.5%, while ready-to-wear and accessories was changed from growth of 4% to a decline of 1%; Asia-Pacific excluding Japan was changed from growth of 3% to flat, with the revisions still focused on non-leather goods and Asia.
  • The bank forecasts group growth at constant exchange rates of 5.4% and 5.8% in 2026 and 2027, respectively, and has cut its operating margin forecasts to 40.0% and 40.4%, respectively. Its 2027 margin forecast was previously 41.1%, and its tax-rate assumption has also risen from 30% to 33%; consequently, its earnings-per-share forecast was cut by approximately 7% to 48.7 euros, a larger reduction than the approximately 1.1% cut to its revenue forecast. Its 2026 earnings-per-share forecast was cut by approximately 2%.

Valuation has fallen sharply; why does Barclays maintain its equal-weight rating?

  • Since the start of the year, market expectations for Hermès’ constant-currency growth over the next 12 months have fallen from approximately 9%–10% to 6%–7%, while the corresponding forward price-to-earnings multiple has fallen from approximately 47 times in mid-January to approximately 27 times. Barclays believes the simultaneous weakening of sustained high growth and clear industry outperformance, which previously supported the premium, is the key to the valuation contraction.
  • The Ferrari comparison points to the sequence of a recovery: its share price recovered only after sales growth expectations began to be revised upward. Barclays believes that medium-term expectations for Hermès’ non-leather goods and Asia-Pacific businesses must first be lowered, and that it will take at least another 1–2 quarters before better-than-expected results drive upward forecast revisions.
  • Hermès provides guidance only for its leather goods business, which accounts for approximately 45% of sales, so adjustments to overall expectations depend more on analysts changing their models. Barclays maintains its equal-weight rating and has cut its price target from 1,660 euros to 1,570 euros, retaining the possibility of a medium-term recovery while remaining cautious in the short term.