Hermès Q2 sales rise 9%; U.S. prices up more due to tariffs

Post by : Monika

Photo: Reuters

In late July 2025, French luxury brand Hermès announced that its sales grew by 9% in the second quarter of the year. This is a big achievement because other major luxury brands are facing a slowdown.

Hermès made about €3.9 billion, or around $4.5 billion, in sales during this period. While this was slightly below what experts had expected (they predicted 10% growth), it still showed that Hermès is doing better than many of its rivals.

Hermès is famous around the world for its high-end handbags like the Birkin and Kelly bags. These luxury items are not only expensive but also hard to get because the company makes a limited number each year.

Why Did Hermès Grow While Others Struggled?
There were several reasons Hermès was able to grow even when the market was down:

Strong Leather Bag Sales:
The biggest reason was the increase in sales of leather bags. These bags are Hermès' most popular items, and their demand remained strong even when other fashion items like clothing and silk products saw slower sales.

Price Increases Helped Profit Margins:
Hermès raised prices by 7% worldwide and added another 5% increase in the U.S. These increases helped the company deal with higher costs and new trade tariffs on goods from Europe. The company used this smart pricing strategy to make sure its profits didn’t go down.

Limited Supply Boosts Demand:
Hermès only increases its product supply by 6–7% each year. This slow production keeps the brand exclusive and makes people want their products even more. Because of this, even when the economy slows, Hermès can keep selling well.

How Did Sales Perform in Different Parts of the World?
Hermès did better in some regions than others:

United States (Americas):
Sales in the U.S. grew the most, rising by 12.3%. This happened because of the price increases and strong interest in high-end leather goods.

Europe:
The European market saw a 9% increase. Even though some countries in Europe are facing economic troubles, Hermès still did well in this region.

Asia-Pacific (excluding Japan):
Growth in this region was slower, around 5–7%. This was still a good performance, but not as strong as in the U.S.

Japan:
Sales in Japan rose by about 14%, which is higher than in Asia-Pacific and Europe. This shows that demand for Hermès products remains strong in that country.

What Did Hermès Leadership Say?
Hermès Executive Chairman Axel Dumas said the company is staying cautious and doesn’t plan to raise prices again in 2025. He believes the current price hikes are enough to cover the cost of the 15% U.S. tariffs that came from the U.S.–EU trade agreement. He also said that while China is currently slowing down, there hasn’t been a major change in consumer behavior there. This suggests that people in China are still interested in luxury items long-term.

Comparing Hermès to Other Brands

• Many other luxury brands did not perform as well as Hermès in the second quarter. Some examples include:
• Louis Vuitton and Dior (owned by LVMH): These brands reported falling sales.
• Gucci (owned by Kering): This brand also had a tough quarter, with some reports showing double-digit drops in sales.

Experts now believe the entire luxury market might shrink by 2–5% this year. China’s weak economy and more careful spending by buyers in Europe and the U.S. are the main reasons for this trend.

However, analysts say that Hermès and other companies like Richemont (known for luxury watches and jewelry) might continue to do better than others. These companies have strong brands, higher prices, and fewer products in the market, which makes their items more desirable.

Key Financial Numbers

• Let’s look at some important numbers from Hermès’ report:
• Second-Quarter Sales: €3.9 billion, up 9% from last year.
• Operating Profit (First Half of 2025): €3.3 billion, a 6% rise.
• Leather Goods Growth: This area grew the most—about a 15% increase.
• Other Segments: Fashion and silk had smaller increases. Watches and beauty products saw a drop.
• Price Increases: 7% globally, with an extra 5% in the U.S.
• Production Growth Rate: Limited to 6–7% each year.
• Stock Performance: Hermès shares went up by about 2% this year. This is better than most other luxury companies.

Why Did the Price Increases Matter?
The price increases in the U.S. were important because of a 15% tariff on goods imported from Europe. This extra tax could have hurt profits, but Hermès acted early by raising its prices to cover the extra cost. Because Hermès customers are very loyal and the brand is known for high quality, many people still bought the products even after the price hike.

Other brands waited too long or didn’t raise prices as much. As a result, they struggled to keep up their profits when demand dropped.

What Might Happen in the Future?
The global luxury market still faces problems. China’s slowdown and changing buyer habits in Europe and America may cause more trouble for brands. Some companies might need to change their products, pricing, or where they sell their items.

• Hermès seems to be in a good position because:
• It has a strong brand name.
• It keeps product supply low, which helps demand.
• Its customers are loyal and less price-sensitive.
• It is expanding carefully and hiring to keep its business steady.

Hermès has shown that even during hard times for the luxury industry, smart planning and a strong brand can help a company succeed. By raising prices early, keeping production limited, and focusing on popular items like leather handbags, Hermès grew its sales by 9% in the second quarter of 2025.

While other luxury brands are seeing their numbers drop, Hermès continues to stand out. The company is now preparing for future challenges by staying cautious and focused on quality. With the global market still uncertain, Hermès’ careful approach might keep it on top for the rest of the year and beyond.