Hermes Poised to Overtake Louis Vuitton as Luxury’s Top Brand

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According to Citigroup Inc. analysts, French luxury brand Hermes has the potential to become the industry’s largest brand by turnover, potentially surpassing LVMH’s flagship label, Louis Vuitton.

Thomas Chauvet projected that Hermès’ sales could reach a “symbolic” €20 billion ($21.3 billion) by 2027 or even earlier. This projection comes after Louis Vuitton achieved this milestone in 2022. In 2023, Hermès reported group revenue of €13.4 billion.

Chauvet emphasised Hermès’ predictable growth, margin, and cash flow profiles within the luxury industry. He praised the brand’s pricing strategy, which spans from affordable to ultra-luxury, its control over distribution channels, and its potential for growth in categories beyond leather, such as ready-to-wear, watches, jewellery, and tableware.

Despite concerns about a potential slowdown in demand for high-end items post-pandemic, Hermès’ shares have outperformed other luxury goods stocks, showing a 20% gain so far this year. In comparison, the industry gauge rose by just 6.8%, and LVMH increased by 8.2%.

Chauvet’s price target for Hermès stands at €2,350, with a neutral rating on the brand since 2020. He also noted that Hermes is less susceptible to industry downturns due to its clientele of very wealthy individuals and a business model driven by scarcity.

Hermes is set to provide an update on its first-quarter sales on April 25. Meanwhile, LVMH remains the world’s largest luxury group, encompassing 75 brands with products ranging from handbags to Champagne. HSBC analysts estimate that Louis Vuitton alone contributes around 50% of LVMH’s profitability and accounts for 26% of its sales.