Hermes (HESAF), a French luxury-goods company known for Birkin handbags, fell 10.5% in Wednesday's European trading after reporting second-quarter growth broadly in line with expectations and no fundamental recovery in China. The shares reached 1,517 and were heading toward their steepest daily decline in more than 15 years. China remains the company's largest market.
Currency-adjusted quarterly sales increased 6.7% to 4.1 billion, compared with 6% growth during the first quarter. Leather-goods revenue advanced 10%, slightly below the 10.8% consensus, while Asia-Pacific revenue excluding Japan increased 2.5%, below expectations of 3.3%. Hermes reported a 41% operating margin, exceeding expectations. Chief Executive Axel Dumas reported improving tourist traffic at the company's Paris stores but said uncertainty remained in France and the Middle East.
Morningstar analyst Jelena Sokolova said Hermes traded at approximately 38 times earnings, the highest multiple in the luxury sector, while earnings had shown limited movement. That valuation increases the importance of China because modest regional growth may make it more difficult for operating results to meet expectations embedded in the stock price. Hermes shares were already down approximately 20% during 2026 before Wednesday's decline. Investors may now evaluate whether leather-goods demand and improved Paris tourism can offset continuing weakness in China during the second half.