Jefferies Outlook on Hermès International

Jefferies maintains a Buy rating on Hermès International but reduces its price target to €2,000 from the previous €2,400, citing mixed performance trends in China and a weaker‑than‑expected first quarter that raised doubts about the group’s ability to sustain its historically strong growth and profitability.

The broker highlighted that first‑quarter organic sales grew 5.6%, a surprise to investors. Growth was uneven across regions: the Americas posted a robust 17.2% increase, Japan and Europe remained healthy (specific percentages not disclosed), while Asia excluding Japan expanded only 2.2%, reflecting ongoing challenges in the Chinese market. The quarter’s weakness was attributed to soft wholesale demand, reduced Middle‑East travel spending in Paris, and sluggish Chinese consumer demand.

Looking ahead to the second quarter, Jefferies forecasts organic revenue growth of 6.9%, slightly below the market consensus of 7.3%. The growth is expected to be driven by 11% expansion in leather‑goods and 3.5% growth in non‑leather categories. For the first half of the year, the brokerage projects EBIT of approximately €3.29 billion, broadly in line with consensus estimates.

Jefferies pointed to several encouraging signals ahead of the earnings release scheduled for July 29, 2026:

  • Chinese quota spending for Hermès’ sought‑after handbags appears to be recovering.
  • Birkin auction premiums have improved globally.
  • U.S. Google search interest in the Hermès brand surged roughly 50% year‑over‑year in the second quarter.
  • Global web traffic to Hermès’ digital platforms is up about 16%.

The brokerage noted that the stock’s valuation has become more attractive after a sharp derating; shares now trade at roughly 33 times expected 2027 earnings, representing a significant discount to the historical premium levels and suggesting that investors are pricing in a prolonged slowdown in growth and returns.

Although Jefferies has cut its sales and earnings forecasts for 2026‑2028, it maintains that Hermès remains one of the best‑positioned luxury brands to benefit from rising wealth among affluent consumers, particularly in Asia and the United States, and expects the upcoming results to help improve investor sentiment.