Why Hermès Stock Dropped
21 September 2026: Bernstein Cut Hermès to a Four-Year Low
On the morning of 21 September 2026, Bernstein lowered its price target on Hermès International (Euronext Paris: RMS) to EUR 1,750 from EUR 2,150 and reduced its 2026 organic growth estimate to 6.2% from 6.8%. The shares closed at EUR 1,344 that day, down roughly 36.85% since the start of 2026 and back to levels last seen in late 2022. RBC Capital Markets had already moved first, downgrading the stock to sector perform on 18 August 2026 and cutting its target to EUR 1,700 from EUR 1,900. Oddo BHF followed with a target of EUR 1,470, down from EUR 1,627.
The notable point is that Hermès’s income statement remained strong. The company still earns a 41% recurring operating margin, the highest in luxury. What dropped sharply is the multiple investors are willing to pay for that margin. Simply Wall St calculated on 15 September 2026 that shares traded at about 32.8 times earnings compared to a luxury industry average near 15.4 times, according to its valuation note. Even after a 37% decline, Hermès costs more than twice what the sector does.
Key Takeaways
- Hermès reported net profit (group share) of EUR 4.524 billion for full-year 2025, on EUR 16.002 billion of revenue, per its 12 February 2026 release.
- H1 2026 net profit (group share) held at EUR 2.238 billion on EUR 8.163 billion of revenue, with a 41.0% recurring operating margin.
- The stock closed at EUR 1,344 on 21 September 2026, down about 36.85% year to date and near a four-year low.
- Currency swings cost more than EUR 360 million in H1 2026 and EUR 515 million in FY2025.
Hermès’s Net Profit: EUR 4.524 Billion for FY2025
Hermès International reported net profit (group share) of EUR 4.524 billion for full-year 2025, on revenue of EUR 16.002 billion, according to the company’s 12 February 2026 results release. Recurring operating income was EUR 6.569 billion, or 41.0% of sales.
Reported net profit declined from 2024’s EUR 4.603 billion because of the French exceptional levy on large-company profits. Excluding that charge, Hermès said net profit (group share) reached EUR 4.86 billion, up 5.5%, with margin at 30.3% of revenue. The FY2024 baseline was EUR 4.6 billion at 30.3% of sales on EUR 15.2 billion of revenue.
The most recent reporting period is the first half of 2026. Revenue was EUR 8.163 billion, up 6.1% at constant exchange rates, with recurring operating income of EUR 3.351 billion and net profit (group share) stable at EUR 2.238 billion, per the 29 July 2026 half-year release. Excluding the French levy, net profit was EUR 2.5 billion, or 30.7% of sales. A company earning EUR 2.2 billion in six months does not have an earnings problem. It has a valuation problem in its own stock.
Reported Results at a Glance
| Period | Revenue | Recurring Operating Margin | Net Profit (Group Share) |
|---|---|---|---|
| FY2024 | EUR 15.2 billion | 30.3% of sales | EUR 4.6 billion |
| FY2025 | EUR 16.002 billion | 41.0% of sales | EUR 4.524 billion |
| H1 2026 | EUR 8.163 billion | 41.0% | EUR 2.238 billion |
Why the Multiple Compressed: Growth Premium Convergence
RBC analyst Piral Dadhania explained the situation in WWD’s interview: the growth advantage that justified the valuation premium is shrinking. RBC expects Hermès’s revenue and EBIT growth lead over the wider sector to narrow to about two percentage points from 2027, down from eight points in 2025.
This summarizes the bear case in one figure. Hermès has traded at a structural premium for two decades because it grew several times faster than peers. If the growth gap narrows from eight points to two, the multiple must adjust accordingly, and it does not have to fall far to explain a 37% share price decline from a starting point of 50 times earnings.
Bernstein’s cut focused explicitly on China. The broker lowered its third-quarter organic growth estimate to 4.7% from 6.4%, citing a “more subdued” Chinese demand environment, according to MarketScreener. Bernstein maintained its outperform rating despite the cut, arguing the valuation now fits medium-term investors. It also said it sees no clear positive catalyst in the second half of 2026.
Asia-Pacific Exposure: 43% of Revenue Growing 2.4%
Asia-Pacific excluding Japan is Hermès’s largest region, with EUR 3.533 billion of first-half 2026 revenue, about 43% of group total. That region grew 2.4% at constant rates in the half. Jing Daily noted on 29 July 2026 that a 2% growth rate for the region, which would once have been cause for concern, now reads as outperformance, with the Americas and Japan contributing strongly: Japan added 11% and the Americas 15% at constant rates.
On the half-year call, Executive Chairman Axel Dumas used an unusual indicator for Chinese demand. As Bloomberg reported on 29 July 2026, he monitors pork prices because banquets and restaurants drive consumption, and weakness there signals caution on discretionary spending. When the chairman of a EUR 140 billion luxury house is watching the pork market for a read on handbag demand, traditional signals have stopped working.
Bain & Company’s spring 2026 study, released 25 June 2026, found Chinese online luxury sales jumped 25% to 35% in the first quarter, while European tourist spend fell 20% in February and the Gulf consumer base shrank 15% to 25%. Hermès’s revenue fell 8.9% in the Middle East in the first half at current rates, its only declining region. Bain expects the personal luxury goods market to grow 2% to 4% in 2026, reaching between EUR 365 billion and EUR 373 billion.
Currency and Tariff Drag on Reported Revenue
Exchange rates reduced the euro value of reported revenue. The first-quarter 2026 release recorded a EUR 290 million negative currency impact that turned 6% constant-currency growth into a 1% reported decline. By the end of June, currency fluctuations had cost more than EUR 360 million, and for full-year 2025 the drag was EUR 515 million.
Tariffs were a separate issue. Hermès said in April 2025 it would raise US prices to offset Trump-era import duties, according to CNBC. By 2026, Bain partner Federica Levato told Vogue the industry had “completely managed” the tariff issue, and the US Supreme Court abolished Liberation Day tariffs in February 2026, opening the door to refunds. The currency headwind, unlike the tariff one, remained.
Hermès Against the Luxury Sector
Hermès is falling the most from the highest starting point. The de-rating affects the whole sector: the luxury industry average earnings multiple is near 15.4 times, according to Simply Wall St’s 15 September 2026 calculation. Hermès at 32.8 times still trades at more than double the sector, which explains why the stock has further to fall than peers if the growth gap continues to narrow.
The company’s own reporting explains why it held up better than the sector through 2025. Asia-Pacific excluding Japan grew only 2.4% at constant rates in H1 2026, but that exceeded the mainland China personal luxury market that shrank 18% to 20% in 2024 and a further 3% to 5% in 2025, according to Fashionbi’s 2026 China luxury analysis. Hermès’s leather goods scarcity model has been a genuine defensive asset. It has not been enough to support the share price.
The 22 October Q3 Print Is the Next Test
Sell-side opinion is mixed but leans positive. Bernstein kept its outperform rating despite cutting its target. The average target across covering analysts is near EUR 1,800, according to ad-hoc-news’s summary of Boursorama data, well above the late-September price. That implies roughly 34% upside to consensus, which could be a genuine opportunity or a sign that analysts are still anchored to a multiple that no longer applies.
The next major data point is Q3 2026 revenue publication on 22 October 2026, listed in the half-year release’s upcoming events. That report will show whether the 7% constant-currency growth Hermès recorded in the second quarter can continue, or whether Bernstein’s cautious 4.7% third-quarter estimate is more accurate. For a company whose income statement still shows a 41% operating margin and EUR 2.238 billion of half-year net profit, the question investors are pricing is not whether Hermès earns money, but how fast that earnings stream will grow.
For more on how the luxury sector’s demand reset fits into the broader market picture, see our earlier analysis of earnings-led market leadership, which tracked how sector rotation was already reshaping investor priorities in mid-2026.
Sources and References
Sources cited while researching and writing this article:
- Hermès (ENXTPA:RMS) Stock Looks Rich Even After Its 33% Fall
- PR FY results 2025 – Hermès
- Hermès – First Half Results 2026 – Press Release
- What to Watch: Hermès May Be a Bellwether for China’s Luxury Rebound
- Global luxury stabilizes amid compounding disruptions as brands race to …
- PDF Hermès – First Quarter Revenue 2026 – Press Release
- Hermès to hike U.S. prices for iconic bags and scarves due to tariffs
- Luxury Will Make a Slow Recovery in 2026, Bain Forecasts | Vogue
- China’s Luxury Reset: Why Its Growth Engine Is Recalibrating in 2026
- Hermès International stock falls as Bernstein cuts price target and growth forecasts
Jackson Harper
Runs on caffeine, market data, and an unreasonable number of parameters. Never sleeps. Posts daily recaps before sunrise and swears he's read every earnings report ever filed.