Hermes International SA delivered a stronger-than-expected half-year performance, powered by robust demand for its flagship leather goods and exceptional growth in the Americas and Japan. However, currency fluctuations significantly weighed on its earnings amid global economic uncertainty.
The luxury giant reported on Wednesday that second-quarter sales rose by 6.7% on a constant-currency basis, surpassing the Bloomberg consensus analyst estimate of 6.51%. Total revenue for the quarter reached €4.094 billion, a 4.8% increase year-on-year, also slightly beating the market forecast of €4.07 billion.
Executive Chairman Axel Dumas stated that the first-half results "fully demonstrate the strong appeal of our 16 business divisions and the trust of our clients," expressing "great confidence" for the second half of the year.
Currency effects were the most significant drag on the period's performance. Hermes noted that monetary fluctuations had a negative impact of over €360 million on revenue through the end of June. This caused reported first-half revenue growth to slow to just 1.6%, a stark contrast to the 6.1% growth achieved at constant exchange rates. Despite this, the recurring operating margin for the first half remained solid at 41.0%, exceeding analyst expectations of 40.3%, while adjusted free cash flow surged 18% year-on-year to €2.182 billion.
Americas and Japan Lead Growth, Asia-Pacific Shows Moderation
Geographically, the Americas continued its strong momentum. Sales in the region grew by 15.3% on a constant-currency basis in the first half, with second-quarter growth of 13.7%, slightly below the anticipated 13.9%. Hermes highlighted that the growth was balanced across all countries and business segments, and the group successfully launched the second chapter of its Fall-Winter 2026 womenswear collection in Los Angeles in June.
Japan was another standout performer, with first-half constant-currency sales rising 11.0%. The pace accelerated to 12.3% in the second quarter, beating the analyst consensus of 10.7%, driven by increased foot traffic and sustained loyalty from local clients. The group completed store expansions or openings in Osaka and Nagoya during the period.
Growth in the Asia-Pacific region, excluding Japan, was more moderate. First-half constant-currency sales increased by 2.4%, with second-quarter growth at 2.5%, slightly missing the 3.2% estimate. Hermes reported that the Greater China region continued its growth trajectory, with South Korea performing particularly well. New stores were opened in Hanoi, Vietnam, in January and in Beijing's Sanlitun district in April. The Middle East market remained under pressure due to geopolitical tensions, with first-half sales declining 4.2% on a constant-currency basis, though the group noted signs of a gradual recovery in the second quarter.
In Europe, sales in the region excluding France grew by 8.8% in the first half and 8.3% in the second quarter. The French domestic market saw a pick-up to 6.2% growth in the second quarter, benefiting from local consumer demand and a recovery in tourist traffic.
Leather Goods and Silk Outperform, Perfume Drags on Results
At the business segment level, the Leather Goods and Saddlery division remained the core growth engine. Second-quarter sales jumped 10.2% on a constant-currency basis, bringing first-half growth to 9.8%. New models like the Cliquetis, Kelly Hobo, and Double Longe received enthusiastic market responses. To continue expanding production capacity, Hermes opened its 25th leather goods workshop in Loupes, Gironde, France, in April, with plans to build three more in Charleville-Mézières (2027), Colombelles (2028), and Les Andelys (by 2030).
The Silk and Textiles division posted a strong 12.2% constant-currency sales increase in the second quarter, significantly exceeding the analyst estimate of 7.5%, and achieving 9.7% growth for the first half. The Watches division, after a weak first quarter, rebounded with 4.4% growth in the second quarter, also handily beating the analyst expectation of 0.17%.
Perfume and Beauty was the weakest segment in the period. Second-quarter sales fell by 9.5% on a constant-currency basis, a much steeper decline than the expected 1.47%, resulting in a 4.5% drop for the first half. Hermes stated it would continue to develop its product lines, having launched its first foundation, Plein Air, under the Hermes Beauty Line earlier this year.
Solid Profitability and Strong Cash Flow
In the first half, Hermes reported recurring operating profit of €3.351 billion, a slight increase year-on-year and above the analyst forecast of €3.27 billion. The operating margin was 41.0%, a modest narrowing from the 41.4% recorded in the first half of 2025, but better than the market expectation of 40.3%. Net profit attributable to the group stood at €2.238 billion, roughly flat year-on-year. This figure includes a special tax on large company profits levied in France. Excluding this tax, net profit reached €2.5 billion, representing 30.7% of sales.
Cash flow performance was particularly strong. Operating cash flow grew 16% to €2.694 billion, supported by improved inventory management and high sell-through rates for its latest collections. Adjusted free cash flow rose 18% year-on-year to €2.182 billion. After distributing €1.915 billion in dividends and repurchasing €160 million in shares, the group's adjusted net cash position stood at €12.926 billion at the end of June, an increase from €12.773 billion at the end of 2025.
Outlook: Currency Pressure Persists, Medium-Term Targets Unchanged
Hermes stated that despite ongoing uncertainties in the global economy, geopolitics, and currency markets, it confirms its "ambitious" medium-term revenue growth target, measured at constant exchange rates. The group will continue to rely on its highly integrated artisanal model, a balanced distribution network, creative product development, and client loyalty to drive long-term growth.
Currency fluctuations remain a key risk for investors. With over €360 million in negative revenue impact from exchange rates through the end of June, and the strong dollar environment not yet showing signs of reversal, this pressure is expected to persist into the second half. The group's next scheduled financial disclosure is its third-quarter revenue report on October 22, 2026.
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