Hermès Faces Rare Sell Ratings as Growth Slows

Hermès International SCA, known for its iconic Birkin and Kelly handbags, has received its first sell ratings in over a year from analysts at Goldman Sachs and UBS. The luxury brand's shares dropped by as much as 3%, extending its year-to-date decline to over 40%. This performance is on track to be the worst annual showing since the company went public in 1993.

Goldman Sachs analysts, led by Erwan Rambourg, argue that Hermès' long streak of double-digit growth is ending. They highlight weakness in non-leather products, which are more dependent on aspirational shoppers. Rambourg noted that while Hermès' growth may still outpace its peers, it is expected to be more modest than investors have grown accustomed to.

UBS analyst Zuzanna Pusz also sees signs of vulnerability, pointing to increased availability of Hermès products on the resale market. This challenges the brand's reputation for tightly controlled supply and long waiting lists. The company's valuation premium over luxury peers has already shrunk significantly, with its stock now trading at about 27 times forward earnings, less than half its multiple earlier in the year.

The next critical test for Hermès will come with its third-quarter results, due in mid-October. Analysts predict full-year revenue growth at constant exchange rates to slow to 6.82%, the weakest pace since 2020 when the pandemic impacted the industry.