Hermès: Well Positioned For The Well-Heeled

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Hermès: Well Positioned For The Well-Heeled

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Concerns and opportunities. Our RMS scrapes suggest that: 1) The quota ratio in China is seeing a

solid seasonal rebound despite an ongoing loss of share of voice on RedNote (at a time when rivals

embark on aggressive marketing pushes); 2) Auction premiums globally continue to recover with

the May 2026 average Birkin auction premium vs. midpoint of reserve prices improving to 44%; 3)

US brand resonance impresses with Google search interest +50% YoY in Q226 to date; 4) Global

engagement also impressive with web traffic +16% on average in Q226 to date.

The stock's derating to c.33x 2027E earnings (a 136% premium to the STOXX600 vs an average

of 166% pre COVID, with margins considerably higher than those years and with peak net

cash balances, and c.240% post COVID) suggests that investors are pricing in a clear, ongoing

moderation in top-line growth to MSD and negative developments in the group's ROCE profile. We

are more sanguine than that.

Trimming numbers and PT, staying on Buy. Hindsight shows that our Buy upgrade of end Jan was

ill-timed (click here), with the China miss and short-term ME hit combining to drive trims to cons

and a disproportionate derating. As was the case back earlier in the year, we still believe the group

is a well positioned soft luxury player for Asian AI monetisation tailwinds. This should underpin the

group's vastly superior ROCE profile (and by extension market relative premium). We reiterate Buy

ahead of results which should help rebalance the very negatively skewed investor debate of recent

months.

James Grzinic * | Equity Analyst

44 (0) 20 7029 8667 | jgrzinic@jefferies.com

FY (Dec) 2025A 2026E 2027E 2028E Frederick Wild ^ | Equity Analyst