According to analysts at Citigroup Inc., Hermès could emerge as the leading brand in the luxury industry by turnover in the foreseeable future, potentially surpassing LVMH’s Louis Vuitton.
In a note dated April 12, Thomas Chauvet mentioned that the renowned maker of the Birkin bag could achieve a turnover of around €20 billion ($21.3 billion) by 2027 or earlier. This milestone was previously attained by Louis Vuitton’s fashion label in 2022. Hermès recorded group revenue of €13.4 billion in 2023.
Chauvet emphasized Hermès’ consistent growth, strong margins, and cash flow, attributing it to the company’s diverse pricing strategy and control over distribution channels. He also highlighted opportunities for expansion into categories beyond leather goods, such as ready-to-wear, watches, jewelry, and tableware.
Despite concerns about a potential slowdown in luxury demand following the pandemic-induced surge, Hermès’ shares have shown resilience, outperforming other luxury stocks with a 20 percent increase this year. In comparison, the industry gauge rose only 6.8 percent, while LVMH experienced an 8.2 percent increase.
On Monday, the stock rose by 1.8 percent, inching closer to Chauvet’s price target of €2,350. Since initiating coverage in 2020, he has maintained a neutral rating on Hermès.
Due to its clientele predominantly comprising affluent individuals and a business model driven by scarcity, Hermès is viewed as relatively insulated from downturns in the industry. The company is scheduled to provide an update on first-quarter sales on April 25.
LVMH, a conglomerate known for its 75 luxury brands, including Louis Vuitton and Champagne, remains the largest player in the luxury sector. According to HSBC analysts, Louis Vuitton alone contributes approximately 50 percent of LVMH’s profitability and accounts for 26 percent of its sales.
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