Hermès overtakes LVMH for luxury’s top spot after weak sales spark sell-off

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Hermès leapfrogged LVMH to become the world’s most valuable luxury company on Tuesday, after shares in the owner of Louis Vuitton tumbled on the back of disappointing first-quarter results.

In a bruising morning for the luxury sector in which the companies swapped spots several times, shares in Paris-listed LVMH fell 7.5 per cent, sending the group’s market capitalisation down to €245.3bn.

Shares in Hermès, the maker of Birkin and Kelly bags, dropped by just 0.4 per cent, giving it a market capitalisation of €247.1bn.

The luxury industry has struggled following a boom in the pandemic as middle-class consumers rein in spending and China’s economy falters, factors that are now being compounded by Donald Trump’s aggressive trade war.

LVMH’s first-quarter results, released late on Monday, showed that sales in its key fashion and leather goods division fell 5 per cent, far short of analysts’ expectation of 1 per cent growth.

By contrast, Hermès’ ultra-wealthy client base and tightly controlled product releases have enabled it to weather the recent slowdown better than its rivals.

LVMH’s lacklustre quarterly sales ignited a broader sell-off in luxury stocks on Tuesday, with Prada falling 4.2 per cent and Kering declining by 1.4 per cent. Shares in L’Oréal and Puig also fell after LVMH’s results hinted at a broader slowdown in beauty.

Hermès has been steadily closing the gap with LVMH in a remarkable shift 15 years after the French conglomerate tried to buy its smaller rival in a covert raid.

The turmoil in the luxury industry comes as Trump has launched sweeping “reciprocal” tariffs on dozens of trading partners, a move that has convulsed markets and shaken US consumer confidence.

Earlier this month, the US president announced 20 per cent levies on goods imported from the EU. That rate was later reduced to 10 per cent as part of a 90-day pause on the steepest tariffs.

The tariffs, which were more aggressive than had been widely expected, led analysts at Bernstein and HSBC last week to slash their expectations for a luxury recovery in the second half of the year.

Citigroup analyst Thomas Chauvet said that because of the economic uncertainty generated by Trump’s tariffs, “it is difficult to build a credible scenario” in which revenues at LVMH and in the luxury sector overall improved in the coming quarters.