Fashion News

Hermes can surpass Vuitton as luxury’s biggest brand, analysts say

The Birkin bag maker’s sales are set to hit the ‘symbolic’ €20 billion level by 2027, according to Citigroup analysts

Jane Birkin's 'Birkin' bag by Hermes goes on view during the "Bags: Inside Out" press view at Victoria and Albert Museum on December 08, 2020 in London, England

Hermes has potential to surpass LVMH’s flagship Louis Vuitton in the coming years as the luxury industry’s biggest brand by turnover, according to Citigroup analysts.

The Birkin bag maker’s sales are set to hit the “symbolic” €20 billion level by 2027 or before, Thomas Chauvet wrote in a note dated April 12 — a milestone that the Louis Vuitton fashion label reached in 2022. Hermes generated group revenue of €13.4 billion in 2023.

“Hermes enjoys one of the most predictable growth, margin and cashflow profiles in the luxury industry,” said Chauvet.

The analyst highlighted the French firm’s pricing strategy, which ranges from affordable to ultra-luxury, its control over distribution and opportunities to grow in categories beyond leather such as ready-to-wear, watches, jewellery and tableware.

Jane Birkin, who inspired the famous Hermes Birken bag, attends the ‘Jane Birkin sings Serge Gainsbourg VIA JAPAN’press conference at L'Institut Franco-Japonais de Tokyo on March 26, 2013 in Tokyo, Japan

While there have been concerns over a slowdown in demand for high-end items following a post-pandemic boom, Hermes’ shares have outperformed fellow luxury goods stocks with a 20 per cent gain so far this year. A gauge tracking the industry is up just 6.8 per cent over the same period, while LVMH has risen 8.2 per cent.

The stock gained 1.8 per cent on Monday, taking it closer to Chauvet’s price target of €2,350. He has had a neutral rating on Hermes since initiating coverage in 2020.

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Hermes is considered to be more insulated from an industry downturn, due to its exposure to very wealthy clients and a unique business model which is driven by scarcity. The company is due to give an update on first-quarter sales on April 25.

Conglomerate LVMH is the world’s biggest luxury group, with its 75 brands making products ranging from handbags to Champagne. HSBC analysts have estimated that Louis Vuitton alone generates around 50 per cent of LVMH’s profitability, and accounts for 26 per cent of sales.