Hermès maintains a cautious 2Q26E outlook; 2H26E improvement depends more on the return of high-end tourists and store space contribution

Overview

This report is Bernstein's update after speaking with Hermès ahead of its 2Q26/1H26 earnings release. The core view is that 2Q26E will see only limited improvement versus 1Q26: spending by European tourists and local spending in the Middle East are improving marginally, but global demand remains mixed; a more visible trading improvement is more likely in 2H26E, driven by the recovery in high-end tourist spending and stronger retail space contribution.

Core views

Hermès' underlying resilience continues to come mainly from strong categories such as leather goods, ready-to-wear, and silks & textiles. The full-year price and volume growth framework for leather goods is unchanged, but perfumes are being held back by distributor caution, watches remain difficult, and this may reflect weak demand in China. Regionally, the United States, South Korea, and Japan remain dynamic; local consumption in Europe is strong and French tourist trends have improved slightly; Middle East stores have returned to normal, but tourists have not yet come back, so local consumption only partly offsets the gap; China remains weak, making a meaningful acceleration difficult.

Analysis framework

The report is based on the latest operating feedback obtained through regular company communication, and it breaks down the 2Q26E and 2H26E outlook by business segment, region, retail space, FX and margins, taxes, and other dimensions, combined with Bernstein's rating table and valuation methodology to reach an investment conclusion.

Methodology notes

• Valuation methodRelative P/E valuation

  3.2x target P/E multiple relative to MSCI Europe

  Bernstein applies a 3.2x relative P/E multiple to blended NTM+1 forward EPS forecasts to derive a EUR2,150 target price for Hermès.

• Fundamental trackingCompany communication and segment breakdown

  Decompose growth drivers by segment, region, store space, FX, and margins

  The report updates key operating themes ahead of 2Q26/1H26 through company communication and identifies sequential improvement, growth drags, and potential 2H26 support factors.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Hermès International (RMS.FP)

  Core research coverage

  Strengths

  The leather goods growth formula is solid, RTW and Silks & Textiles remain strong, demand in the United States, South Korea, and Japan is still active, and the brand's premium positioning supports long-term pricing power.

  Weaknesses

  2Q26E shows only a slight sequential acceleration, China remains weak, perfumes and watches are under pressure, Middle East tourists have not yet returned, and FX creates a headwind for revenue and margins.

  Comparison

  Relative to the EDME benchmark, Bernstein assigns an Outperform rating; valuation uses a 3.2x target P/E multiple relative to MSCI Europe.

  Risks

  A fading quiet-luxury aesthetic, scrutiny over animal welfare tied to the use of rare leathers, legal challenges to business policy, and persistent FX and China-demand weakness.

• EDME

  European market benchmark in the rating table

  Strengths

  Used to gauge relative performance and market context.

  Weaknesses

  The report does not expand on the benchmark's fundamentals.

  Comparison

  Hermès' rating and price target are shown in the same table as the EDME benchmark.

  Risks

  Changes in benchmark performance will affect the relative rating judgment.

Key data

• RatingOutperform (O)From Bernstein's ticker table.
• Target priceEUR2,150Based on a 3.2x target P/E multiple relative to MSCI Europe and blended NTM+1 forward EPS.
• Closing priceEUR1,620.00As of June 22, 2026.
• Adjusted EPS2025A EUR43.12; 2026E EUR44.33; 2027E EUR52.47From the report's rating table.
• Adjusted P/E2025A 37.6x; 2026E 36.5x; 2027E 30.9xFrom the report's rating table.
• Full-year growth formula for leather goodsPrice +5-6%, volume +6%The growth pace is non-linear and is expected to accelerate gradually over the year.
• Retail space contributionAbout 1% in FY26The impact is stronger in 2H26, with no material incremental contribution in 2Q26 versus 1Q26.
• FX headwindAbout -3% to -3.5% in 2Q26; about -5% in 1H26; about -2.5% to -3% in FY26Estimated at current exchange rates.
• Margin FX/cost dragAbout -€220m in FY26Company guidance indicates the 2H26 drag is greater than 1H26.
• Effective tax rate for 1H26About 35.4%Expected to be roughly in line with 1H25.

Impact & implications

For investors, the report signals a "high-quality company with limited near-term growth slope." The Outperform rating and target price suggest the medium-term valuation remains attractive, but 2Q26E results may be hard to meaningfully beat expectations; the market will need to watch for a return of high-end tourists in 2H26, the release of New Bond Street contribution, and whether China demand stabilizes. FX and margin pressure may limit near-term earnings leverage.

Risks

• If Hermès fails to keep innovating, it may be pushed into a "classic but lacking novelty" positioning, especially if fashion tastes move away from quiet luxury.
• The company's significant dependence on rare leathers may again draw consumer attention to animal welfare; if it shifts to cheaper raw materials, the scarcity of its signature products could be weakened.
• If Hermès' business policy faces a successful legal challenge, it may be forced to raise handbag prices and could weaken growth in other categories driven by iconic products.
• China trends remain difficult, and weak aspiration-driven consumers may weigh on more mass-aspiration categories such as belts, fashion jewelry, and fashion accessories.
• FX headwinds are expected to persist in 2Q26, 1H26, and FY26, and to pressure margins.

What to watch

• Whether 2Q26E sees only a modest sequential acceleration or a better-than-expected improvement.
• Whether high-end European tourists, especially summer Middle Eastern tourists, return.
• Whether China demand stabilizes and whether the drag on aspiration-driven categories eases.
• The degree to which New Bond Street's space contribution is released in 2H26.
• Whether caution from perfume distributors and weak watch demand improve.
• Whether the FY26 FX headwind and the -€220m margin drag widen or ease.