What to Watch: Hermès May Be a Bellwether for China’s Luxury Rebound

Hermès, a luxury brand, has seen a significant decline in its stock price, down around 32 percent from its 52-week high. Despite continuing to outperform its rivals, investors are becoming wary of the company's unusually high expectations. Analysts predict that Hermès' revenue and EBIT growth advantage over the luxury sector will narrow in 2027, compared to eight points in 2025.

China, once expected to become a significant part of the global luxury market, now represents only about 15 percent of it, with luxury sales in the country experiencing a loss of around 9 to 10 percent since 2019. Despite this, China's luxury market is expected to return to growth, albeit with a different pace than previously anticipated.

Hermès, which has a substantial presence in the Asian market, shows no signs of brand fatigue but faces a more discerning consumer base with spending spread across various price points and brands. The company's third-quarter results in October may provide insights into whether the luxury industry is undergoing a reset.