1/ Hermès dropped 10%+ in a day after Q2/H1 2026 earnings. The key...
Leandro@Invesquotes
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Aug 25, 2026
~2 min read
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1/ Hermès dropped 10%+ in a day after Q2/H1 2026 earnings.
The key Q is...
Were they that bad?
The short answer is they weren't and the stock may finally be at a decent valuation, but let's walk through them.
🧵
The key Q is...
Were they that bad?
The short answer is they weren't and the stock may finally be at a decent valuation, but let's walk through them.
🧵
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2/ Q2 revenue grew 7% in constant currency, accelerating from +6% in Q1.
And that's with the Middle East conflict costing ~150bps. Underlying growth was closer to 8.5%.
Dumas was humble enough to say that "if you take away the bad news, all that's left is good news!"
And that's with the Middle East conflict costing ~150bps. Underlying growth was closer to 8.5%.
Dumas was humble enough to say that "if you take away the bad news, all that's left is good news!"
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3/ What makes this impressive is that China is still weak and France was soft in spots (primarily driven by the Middle East tourist flows)
Two big geographies with zero tailwind, and Hermès still compounded at 7%. That's the whole point about the business model (resilience) and also why it makes little sense to compare it to peers
Two big geographies with zero tailwind, and Hermès still compounded at 7%. That's the whole point about the business model (resilience) and also why it makes little sense to compare it to peers
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4/ The overlooked story was currency.
A 450bps headwind in H1 is depressing reported revenue AND operating profit. Hermès hedges margins, but the absolute base shrinks with currency headwinds
When FX flips to a tailwind, the numbers grow meaningfully with zero change to the underlying business.
One must be careful with reported numbers.
A 450bps headwind in H1 is depressing reported revenue AND operating profit. Hermès hedges margins, but the absolute base shrinks with currency headwinds
When FX flips to a tailwind, the numbers grow meaningfully with zero change to the underlying business.
One must be careful with reported numbers.
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5/ Fundamentals were strong: 41% operating margin in Q2, operating cash flow +18%.
Investments will ramp in H2 (~€1B planned for 2026 vs €340M spent in H1), so FCF takes a temporary breather but it's nothing structural
Investments will ramp in H2 (~€1B planned for 2026 vs €340M spent in H1), so FCF takes a temporary breather but it's nothing structural
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6/ Two reasons the headline multiples you see quoted are misleading:
a) "Exceptional" taxes in 2025/26 are cutting net margin by ~330bps (30.7% normalized)
b) €13B net cash = ~8% of market cap, highest in a decade
a) "Exceptional" taxes in 2025/26 are cutting net margin by ~330bps (30.7% normalized)
b) €13B net cash = ~8% of market cap, highest in a decade
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7/ Running the math: ~€16.6B revenue in 2026, 41% margin → ~€6.8B EBIT.
On a €152B EV, that's 22x EV/EBIT, and this is with currency actively depressing the figures.
On 2027 numbers (my estimates and with a modest FX tailwind), it's closer to 20x.
On a €152B EV, that's 22x EV/EBIT, and this is with currency actively depressing the figures.
On 2027 numbers (my estimates and with a modest FX tailwind), it's closer to 20x.
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8/ Hermes never seems cheap, but the valuation is very different from the scary multiples in the headlines, and the thesis hasn't changed much.
As Dumas put it on the growth vs. exclusivity dilemma:
"It's good to say we are desirable, but it's better if you're desirable and if your sales increase."
As Dumas put it on the growth vs. exclusivity dilemma:
"It's good to say we are desirable, but it's better if you're desirable and if your sales increase."
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Just a thought but I believe you can believe this business is expensive (very fair actually) but it’s not because it’s trading at a given reported multiple (which is pretty misleading)
