Citi Cuts Hermès Price Target on China, France Demand Concerns

Citi has reduced its 12-month price target on Hermès to €1,540 from a previous €1,689, citing concerns over slowing consumer demand in key markets. The bank maintained its Neutral rating on the luxury brand's stock in a research note published Wednesday.

Forecasts Trimmed Ahead of Q3 Results

The revision comes ahead of the French luxury group's third-quarter sales report. Analysts at Citi pointed to "continued demand weakness in China and a softer backdrop in France" as the primary drivers for the adjustment. While trends in other regions are expected to remain broadly consistent with the second quarter, the bank has moderated its growth expectations.

Citi made several downward revisions to its financial model for Hermès:

• The second-half growth assumption for the crucial leather goods division was lowered by half a percentage point at constant currencies.
• Growth estimates for non-leather goods in the second half were cut to 3% from 4%, noting weakness in "aspirational categories" over the summer.
• Group sales forecasts for 2026, 2027, and 2028 were trimmed by approximately 0.5%.
• Consequently, estimates for operating profit and earnings per share (EPS) were reduced by about 1% for each of those three years.

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Implications for Growth

Despite the lowered assumptions, Citi still anticipates double-digit growth for the leather goods division, forecasting 10% growth in the third quarter and 11% in the fourth. This is expected to be supported by volume growth of nearly 6%.

For the full year 2026, the bank now projects constant-currency sales growth of 6.4%, a reduction from its prior forecast of 6.8%. This revised figure suggests a slight acceleration from the 6.1% growth Hermès reported in the first half of the year, though the overall outlook has been tempered by macroeconomic headwinds.