Hermès Loses Its Growth Edge as Berenberg Cuts Rating and Slashes Price Target

Berenberg has stripped Hermès of its "Buy" rating, moving to "Hold" and cutting its price target to EUR 1,230 from EUR 1,850. The downgrade, issued yesterday, rests on a narrower argument than China alone: the luxury house's growth premium over rivals is eroding just as costs climb, sharpening the question of how much of a valuation multiple investors should still be willing to pay.

The new target is built on 23 times expected earnings. It reflects a more cautious read on the company's business momentum rather than a simple reaction to the latest quarterly report.

America Shows How Fast the Gap Is Closing

The shift is starkest in the US. Hermès' growth advantage over LVMH there recently stood at four percentage points, according to Berenberg. Between the first quarter of 2024 and the first quarter of 2026, it had averaged 13 percentage points.

Hermès is still outgrowing its competitor. What matters for valuation, though, is the size and reliability of that lead — and this is precisely where the downgrade bites. Berenberg now sees less distance to the competition and has trimmed its longer-term expectations accordingly.

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For 2027 and 2028, the bank projects six percent currency-adjusted revenue growth in each year, lowering its prior assumptions by one to two percentage points for both.

The revision carries through to profitability. Slower growth leaves less room to absorb higher costs. Finance chief Eric du Halgouët has said Hermès needs five percent nominal revenue growth just to offset cost inflation. Berenberg cut its operating profit forecasts for the two coming years by 1.9 percent and 4.1 percent respectively — the heavier cut for the later year signaling that the more cautious view extends well beyond a short-term demand dip.

China Remains a Drag on Near-Term Demand

China is adding to the pressure. Bloomberg reported that Hermès sales in mainland China fell by up to double-digit percentages year on year in August and September. Exact declines by brand were not disclosed. The pullback in spending has hit even a company whose leather goods business had been expanding.

The weakness is not confined to Hermès. According to Bloomberg, leading luxury brands in China also posted double-digit declines in both months. Golden Week in early October brought no revival in luxury spending despite higher travel outlays. Some industry executives fear the slump could last into 2027 — not a confirmed forecast for Hermès, but a reminder that investors should not take a swift demand recovery for granted.

The regional weight makes this a material risk to growth expectations: Asia-Pacific excluding Japan accounted for roughly 42 percent of group revenue in the first nine months of 2026.

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A Premium That Needs Earning

Hermès continues to trade at a pronounced valuation premium despite softer demand. Media reports put its price-to-expected-earnings ratio at about 27, against roughly 16 for LVMH. Bloomberg notes the multiple peaked near 70 times after the pandemic. The de-rating has been substantial, yet a lower valuation on its own is no clear buy signal.

What counts is whether Hermès can defend its standout growth. Analysts are increasingly doubtful. Du Halgouët has described China as particularly difficult, even as the company presses ahead with investment there.

Hermès is also sticking to its expansion. It plans to raise total production by around six percent over the coming years and has opened a boutique in the Belgian resort of Knokke as part of its European build-out. Those moves point to a long-term strategy, but they are not yet evidence of a near-term demand turnaround. For investors, the real test lies in how added supply meets actual purchases: the expansion has to translate into growth that justifies the premium.

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