Investing.com — Luxury goods maker Hermès International remains well positioned for long-term growth despite a disappointing start to 2026, with investors likely to focus on signs of improving momentum when the company reports second-quarter results on July 29, according to Jefferies.
The brokerage reiterated its Buy rating on the stock but lowered its price target to €2,000 from €2,400, citing continued mixed trends in China and a weaker-than-expected first quarter that shook confidence in the group’s ability to sustain its industry-leading growth and profitability.
Jefferies said first-quarter organic sales growth of 5.6% surprised investors, with wholesale weakness, softer Middle East travel spending in Paris and sluggish Chinese demand weighing on performance. While the Americas posted strong 17.2% growth and Japan and Europe remained healthy, Asia excluding Japan grew just 2.2%, reflecting ongoing challenges in China.
For the second quarter, the broker expects organic revenue growth of 6.9%, slightly below market expectations of 7.3%, driven by 11% growth in leather goods and 3.5% growth in non-leather categories. It forecasts first-half EBIT of about €3.29 billion, broadly in line with consensus.
Jefferies noted several encouraging indicators ahead of the earnings release. The firm said Chinese quota spending for sought-after handbags appears to be recovering, Birkin auction premiums have improved globally, U.S. Google search interest in the brand has surged about 50% year-over-year in the second quarter, and global web traffic is running roughly 16% higher.
The brokerage argued the stock’s valuation has become more attractive after a sharp derating. Shares now trade at around 33 times expected 2027 earnings, a significant discount to historical premium levels, suggesting investors are pricing in a prolonged slowdown in growth and returns.
While Jefferies cut its sales and earnings forecasts for 2026-2028, it maintained that Hermès remains one of the best-positioned luxury brands to benefit from rising wealth among affluent consumers, particularly in Asia and the United States, and expects upcoming results to help improve investor sentiment.
Related articles
Hermès can regain momentum despite China weakness, Jefferies says
Citi pushes back Fed rate cuts to May after blowout January jobs report