Hermès stock lost 40% without the company reporting a single decline. That may now change
The most expensive luxury stock rests on one sentence from the company's CEO: we have never fallen in China. LVMH has just shown what a quarter looks like when the Chinese customer disappears. And on 22 October it will be Hermès's turn.
Key points
Hermès stock has lost about 44% from its January peak, although the company has not reported a single quarter with a decline in revenue
Hermès's quarterly results are released exactly on the day when Beijing's deadline expires for wealthy Chinese to pay an additional 20% tax
Axel Dumas repeats the phrase "we have never fallen in China," but the numbers from Asia show something else
UBS cut its rating to Sell citing a metric that has barely been tracked for Hermès until now
LVMH has just shown what a quarter without the Chinese customer looks like, and Hermès is even more tied to Asia
Two deadlines on one day
LVMH $MC.PA released on Monday 12 October the numbers the sector had been waiting for all summer. The group's organic revenue for the third quarter grew by only 1% to 18.5 billion euros, while the fashion and leather goods division, the heart of the group with Louis Vuitton and Dior, fell by 5%. Analysts had expected a decline of around 1.8%. Asia fell by 5%, and the Chinese clientele according to management reduced spending in the "mid-teens", i.e. by about 15%. And when asked when China will recover, CFO Cécile Cabanis replied that she prefers not to comment on macro and that "your guess is as good as mine".
But for luxury investors this is just an appetizer. The main course will come on 22 October, when Hermès $RMS.PA publishes its third-quarter revenue. The date has one peculiarity: the same day expires the deadline that Beijing gave wealthy Chinese to pay a 20% tax on wealth hidden in offshore trusts. The wealthiest customers of the world's most expensive brand will thus have other worries than a new handbag in the week when their spending starts to be counted.
Before all this, Hermès stock is trading around 1,297 EUR. It has lost about 44% from its January peak of 2,300 EUR, and market capitalization has shrunk to 135.7 billion euros. And all this without a single quarter in which the company reported a decline in revenue.