Hermes International saw its stock price fall by up to 6.2% on Monday following a research note from Kepler Cheuvreux that anticipates margin deterioration in the company’s upcoming first-half financial report. The decline represented the steepest single-day drop for the shares since April 15.
Hermes is set to publish its first-half results before the market opens on July 29. In his note, Kepler Cheuvreux analyst Charles-Louis Scotti described the expected results as a "mixed set." While he projects a modest acceleration in sequential sales growth, he also forecasts a 100 basis-point contraction in Hermes’ adjusted Ebit margin.
Scotti attributes the anticipated margin squeeze to two main factors: underabsorption of fixed costs and headwinds from foreign exchange movements. These dynamics, he argues, will weigh on reported profitability in the first half despite the sales trajectory.
The analyst’s estimates for Hermes’ net profit and earnings per share for the first half sit 4% below consensus, a variance Scotti links to a first-half-skewed phasing of the French surtax. At the same time, he notes that free cash flow generation "should remain exceptionally strong," indicating that cash conversion is expected to be resilient even if margin metrics soften.
The downward move in Hermes shares had spillover effects across other luxury names on Monday. A Goldman Sachs European luxury basket slid as much as 2.9%, its largest single-session drop since May 11. Individual luxury stocks recorded notable declines: LVMH dropped 2.4%, Richemont fell 1.6%, Pandora declined 3.2%, Moncler slid 3.8%, Burberry lost 3.3%, and Brunello Cucinelli fell 3.4%.
Market participants will be watching Hermes’ July 29 results closely for confirmation of the margin outlook and for any additional colour on the drivers Scotti highlighted, including fixed-cost absorption and currency impacts. Given the analyst’s projection of below-consensus net profit and EPS driven by surtax phasing, the timing of tax recognition also emerges as a specific first-half reporting nuance to monitor.
For now, the immediate market reaction underscores investor sensitivity to margin risk within luxury goods companies and the potential for headline moves at large-cap names to reverberate across the sector.