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Hermes will shift Donald Trump’s tariff burden to shoppers in the form of rising U.S. prices for luxury goods, the French group said Thursday that it is betting on the resilience of wealthy consumers.
Chief Financial Officer Eric du Halgouette said the coveted Birkin and Kelly bag makers “compensated for the gloss effect” of the new 10% collection on European imports by increasing prices in the US from May 1, as reported quarterly results.
He added that Hermes will continue to continue “all business sectors” to address changes in US trade policy, but he said the group still calculates the exact level that prices must rise.
Comments arise as the luxury industry builds the radioactive nature of Trump’s trade war in the luxury market and shatters hopes of a US-led recovery this year.
LVMH CEO Bernard Arnaud said on Thursday that the US and the EU would call for the creation of a free trade area, with Brussels taking responsibility if the two sides fail to reach a tariff agreement.
“If Europe cannot negotiate intellectually, there will be consequences for many companies,” he said at the group’s annual meeting.
The US is the largest market in the luxury sector, with LVMH generating a quarter of its domestic revenue last year. However, it already manufactures some of its products from Louis Vuitton and Tiffany in the US, and could expand its capabilities, according to the group’s managing director. He added: “Price adjustment measures may also be considered.”
As one of the most resilient names in the luxury industry, Hermes is expected to bet on a trade disruption, bet on a very wealthy client base, and bet on high demand for bags that exceed supply.
“As we look into a very uncertain future, the group hopes to benefit from a much better pricing ability for peers,” said James Guzinick, analyst at Jeffries.
Trump’s so-called mutual tariffs on US trading partners announced this month have led several analysts to cut expectations for a luxury sector rise in the second half of the year.
China’s softer growth was slightly below revenue growth after a strong 2024 year that showed weight compared to Hermes’ total sales in the first quarter, surpassing the rest of the industry.
The Paris listed group, which currently makes LVMH the largest company in the luxury sector due to its market value, recorded an organic revenue growth rate of 7% in the first quarter at a total of 4.1 billion euros. LVMH reported that group sales fell 3% over the same period.
As a result, the group’s 18% growth reported in the last quarter slowed as the Chinese recession reached sales. Hermes endured being slower than his rival last year.
Sales outside of Japan, Asia, rose 1% “despite a particularly high comparative basis,” resulting in a decline in China’s demand over the past year, the company said. Shares fell 3% in Thursday morning trading.
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With middle-class consumers being held back by spending and China’s economy in decline, the luxury industry has struggled following the boom of the Covid-19 pandemic, and is now exacerbated by Trump’s aggressive trade war.
Hermes sales have progressed in all regions, with the Americas rising 11% and “continued momentum” in March. Europe, France and Japan all rose double digits in the quarter.
The group’s core leather products division grew by 10%. The group’s signature silk scarves’ fashion, jewelry and sales have all grown compared to the previous year.
However, perfume and beauty are segments exposed to ambitious shoppers due to low prices, with watches down 10%.
