Chinese spending curbs weigh on Hermes sales

Hermes reported disappointing sales in the third quarter, citing sluggish demand in China, a sign that the Birkin bag maker is succumbing to the spending curbs affecting shoppers there.

Revenue in the region that includes China, the luxury group's biggest market, flatlined at constant exchange rates, Hermes International said Thursday. Analysts had expected growth of about 1.6%. The region generates around 42% of Hermes' total revenue.

The results "will likely make for a very painful day," said Jefferies analyst James Grzinic in a note.


Hermes shares dropped as much as 9% in Paris, the biggest decline since July. Their 41% slump so far this year puts them on track for the worst annual performance since the company listed in 1993.

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Hopes for a luxury industry revival earlier this year have been dashed by weakness in China and the Middle East conflict, which disrupted shopping hubs such as Dubai. In China, a property crisis, struggling financial markets and authorities' efforts to tax offshore wealth have affected the richest clientele.

The persistent weakness in China, once a driver of growth for luxury brands, is a worrying sign for rivals, including Gucci's owner Kering, which will report sales on Thursday. LVMH Moet Hennessy Louis Vuitton logged a slump in China sales last week.

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Until recent quarters, Hermes had been viewed as largely immune to the vagaries of luxury demand because it enjoyed long waitlists for its most desired products.