Hermès Q1 revenue increased by 7%, slightly below expectations, plans to raise prices comprehensively to cope with tariffs | Earnings Report Insights
In the first quarter, the group achieved revenue of 4.13 billion euros, a year-on-year increase of 7% at constant exchange rates, compared to market estimates of 4.16 billion euros. Hermès stated that it plans to further comprehensively raise prices in the U.S. market starting in May, on top of the regular price increase of 6-7%, to offset the costs brought by Trump's tariff policy
Under the impact of tariff shocks and concerns about economic recession, Hermès' Q1 revenue growth slowed down and fell short of expectations. The group plans to implement a comprehensive price increase to counteract tariff costs.
On Thursday, April 17, the French luxury giant Hermès announced its Q1 2025 financial report, which showed:
In the first quarter, the group achieved revenue of €4.13 billion, while the market estimated €4.16 billion. Calculated at current exchange rates, this represents a year-on-year growth of 9%, and a year-on-year growth of 7% at constant exchange rates, lower than the previous quarter's 18% year-on-year increase.
By region, Japan and the Americas grew by 17% and 11% respectively, showing strong performance, while the Asia-Pacific region (excluding Japan) only grew by 1%.
By category, the core leather goods and equestrian business grew by 10%, becoming the main growth driver; the watch business declined by 10%, and the perfume and beauty business remained flat.
Due to a new round of tariff threats that will suppress demand for high-end handbags and luxury watches, Hermès stated that it plans to further raise prices in the U.S. market starting in May, on top of the regular price increase of 6-7%, to offset the costs brought by Trump's tariff policy.
Hermès Chief Financial Officer Eric du Halgouet stated:
“We will increase the sales prices of all business lines in the U.S. starting May 1 to fully offset the impact of these new tariffs.”
He also added that the final pricing decisions are still being finalized.
Despite the weak performance growth this quarter, Hermès still outperformed its peers.
LVMH's latest financial report previously showed that the group's total revenue in Q1 decreased instead of increasing, with core business revenue unexpectedly declining by 5%. As a result, during Tuesday's European stock market session, LVMH's market value was surpassed by Hermès for the first time, making the latter the highest market value company in the French CAC40 index.
Analysts believe that Hermès' competitive advantage lies in its target customers, who are often less affected by economic recessions, and its product production model that emphasizes scarcity is also attractive. In February of this year, Hermès' valuation briefly surpassed €300 billion.
Strong Performance in the Japanese Market, Robust Growth in Leather Goods and Equestrian
The significant differences in performance across regions reflect the current uneven state of the global consumer market.
The financial report showed that the Asia-Pacific region (excluding Japan) experienced weak growth, achieving only a 1% growth rate. In contrast, the Japanese market performed exceptionally strong, with a year-on-year growth of 17%, mainly due to the continued support from local customers.
Additionally, the Americas also performed well, growing by 11%, particularly with outstanding performance in the U.S. market in March.
Eric du Halgouet commented on this:
“Currently, the company has not observed any significant changes in the behavior of American shoppers; the U.S. still maintains double-digit growth, but part of the reason is low inventory.” In the European market, both France (14%) and other regions in Europe (13%) achieved robust growth, driven by local demand and tourist traffic. Other regions primarily in the Middle East also maintained a good growth momentum of 14%.
From a product category perspective, the leather goods and saddlery business remains the core growth driver for the company, achieving a 10% growth. This reflects the company's emphasis on product innovation, with the new Médor and Mousqueton bag styles gaining market recognition.
Hermès stated that it will allocate over 500 million euros in profit sharing for 2024 to employees in 2025.
The financial report shows that despite facing economic, geopolitical, and monetary uncertainties, Hermès has confirmed its ambitious mid-term revenue growth targets and holds a cautiously optimistic outlook for 2025.