Hermès Q2 up 9% as price hikes offset tariffs; capacity tightness persists
Bottom Line Impact
Price-led growth and controlled capacity should sustain mid-high single digit sales with stable to slightly higher margins, reinforcing Hermès' market-leading brand equity while managing near-term US tariff and demand elasticity risks.
Key Facts
5- Q2 revenue: €3.9b ($4.5b), +9% at constant currency vs ~10% consensus
- 2024 YTD price actions: +7% globally; incremental +5% in US to pass through tariffs
- Prospective tariff rate referenced: 15% on transatlantic goods; details pending
- Production growth calibrated at 6-7% per year; handbags waitlists remain months long
- Shares fell on the results day, signaling investor sensitivity to signs of slowing
Time Horizons
Key Roles Affected
Executive Summary
Hermès delivered Q2 sales of €3.9b, up 9% at constant currency, underscoring resilient demand in leather goods despite broader luxury softness and a post-print share pullback. Management raised prices 7% globally and an additional 5% in the US to offset a prospective 15% tariff, while keeping production growth steady at 6-7%, sustaining scarcity but heightening execution risk in the US.
Actionable Insights
Immediate Actions (Next 30-90 days)
Maintain scarcity-led growth while reallocating high-demand SKUs to the US for the next 1-2 quarters to test elasticity post-price hike, targeting a 0-100 bps traffic decline but stable conversion.
Rationale: Right-sizing US supply protects waitlist health and price integrity, cushioning tariff pass-through without oversupplying.
Role affected:CEO
Urgency level:immediate
Short-term Actions (6-12 months)
Model tariff scenarios at 15%, 20%, and 25%; calibrate regional price architecture to defend gross margin within a -50 to +50 bps band and expand FX hedges on USD exposure.
Rationale: Pre-emptive pricing and hedging maintain margin resilience under policy uncertainty and currency volatility.
Role affected:CFO
Urgency level:short-term
Amplify craftsmanship and longevity messaging in the US with lifetime service guarantees and limited atelier events, aiming for a +3-5 pts uplift in VIC retention and +2 pts NPS in H2.
Rationale: Strengthening value perception offsets price sensitivity among aspirational clients and reduces defection risk.
Role affected:CMO
Urgency level:short-term
Strategic Actions
Pull forward 6-12 months of leather goods capacity additions to the upper end of 7% without compromising QC, and tighten anti-diversion controls in high-gap markets.
Rationale: Balanced capacity growth supports waitlists and mitigates grey-market leakage as regional price gaps widen.
Role affected:Chief Operations Officer
Urgency level:strategic
Risks & Opportunities
Primary Risks
- US demand elasticity post +5% price increase leading to lower conversion in aspirational segments
- Tariff escalation beyond 15% or broader trade frictions compressing margins if not fully passed through
- Extended wait times increasing client frustration and fueling grey-market activity
Primary Opportunities
- Price-mix driven margin expansion if VIC demand remains inelastic despite higher ticket
- Brand equity reinforcement via scarcity and craft storytelling, supporting long-term pricing power
- Selective regional rebalancing to optimize ASP and sell-through without discounting