Hermès growth slows to 4% as China weakness hits valuation

Hermès reported quarterly growth of 4% excluding currency effects, down from 9% the previous year, marking a significant slowdown from its historical 10% trajectory. The stock has fallen 40% this year, valuing the company at 130 billion euros, or 30 times its 4.5 billion euro net profit, compared to a 50x average over the last five to ten years. The core leather goods business grew over 10% excluding currency effects, accounting for half of revenue. Regional performance was mixed: Europe grew 7%, the US 9%, and Japan 10%, while the Middle East shrank and Asia excluding Japan stagnated. China, representing 40% of total revenue, is a key concern due to the weak local economy and the CSI 300 index falling 20% since June into a bear market. The speaker argues the stock could fall to a 20-25x P/E ratio, implying a further 30% drop, though the brand remains strong relative to competitors like LVMH and Gucci, which saw broader declines across regions and categories. The speaker argues that while Hermès is no longer as crisis-resistant as previously believed due to China exposure, its core business remains strong and the current valuation is cheaper than historical averages, though further downside to a 20-25x P/E is possible.