Hermes: Resilient, but Decelerating Sales on a Tough Comparison Base in Asia; Shares Expensive

We maintain our fair value estimate of EUR 1,270 for wide-moat Hermes as the company reported strong third-quarter sales at 15.6% at constant currencies. This was still quite a meaningful deceleration from 25.2% growth at constant currencies in the first half. The Americas' performance continued to be remarkably strong with growth of 20.4%, broadly in line with first-half trends. Hermes is outperforming the vast majority of its luxury peers, which have suffered declines in this market in first-half 2023. We believe Hermes to be more resiliently positioned with less exposure to aspirational clients who are more economically sensitive. Sales in Europe also decelerated only slightly to 18% growth in the third quarter (22% in the first half). Asia, excluding Japan, was the weakest market with 10% constant-currency growth. This came in addition to a challenging comparison base (33.7% growth in this market in third-quarter 2022). Sequential deceleration was broad-based across product segments, with the ready-to-wear and watch segments showing the strongest performance in the quarter.