Hermès overtook rival luxury purveyor LVMH after the Bernard Arnault-run company reported a lackluster start to 2025 with a drop in sales.
Hermès’ market capitalization eclipsed LVMH’s on Tuesday morning by around €210 million, making the Birkin bag maker the most valuable luxury company in Europe, and on France’s CAC40 index.
As of 11.30 a.m. London time, Hermès’ market value was €248.2 billion while LVMH’s was €246.8 billion.
LVMH’s shares were down as much as 8% following the market opening in Paris, as the company reported a 3% decline in first-quarter sales on Monday. Given its large size and presence across leather goods, spirits, and more, the French conglomerate is widely seen as the bellwether of the luxury sector.
The company has also been impacted by the cyclical demand for high-end goods in recent years, as economic pressures have pushed shoppers to rethink their luxury purchases. LVMH’s 2024 sales dropped by 2% to €84.7 billion, while net profit sunk 17% year-over-year.
The company now faces a market made tougher by tariff-related volatility. LVMH’s CFO Cécile Cabanis maintained that the impact of U.S. tariffs was limited for now, leaving “many disappointed,” Bernstein SG’s luxury analyst Luca Solca wrote in a note.
Analysts are generally worried about the impact tariffs could have on consumers’ appetite for luxury bags and shoes over time.
For now, the silver lining is that “the big investor fear that the U.S. is slowing for luxury does not appear to be the case in 1Q with the slowdown in the U.S. largely due to Sephora and cognac” rather than in LVMH’s more lucrative segments of fashion or leather goods, Deutsche Bank analysts led by Adam Cochrane wrote in a note Tuesday.
LVMH has a small manufacturing presence in America, which it could ramp up amid higher tariffs. Arnault seems to consider this idea favorably, too.
While LVMH is finding its feet in the ever-changing geopolitical and economic climate, Hermès has remained unscathed so far. It has managed to attract buyers at a time when some of the sector’s most prominent players, including Kering, have been struggling.
Last year, Hermès saw revenues jump 15% to €15.2 billion.
Executive chairman Axel Dumas said the strong performance came down to Hermès’ unique model and its craftsmanship. For instance, despite lacking a marketing department, the company has had no trouble drawing shoppers willing to spend thousands of euros on a single purchase.
“Some people want to do a bit like Hermès, but it doesn’t work out at the end of the day,” Dumas said during the call in February.
Hermès’s resilience will be tested amid a wave of U.S. tariffs, which threaten the fortunes of the entire luxury sector. However, Jefferies analysts called the company a “relative safe haven” in a note last week, adding that they expect Hermès’ first-quarter results on Thursday to “confirm the brand’s superior U.S. resilience.”
Dumas is clear that if tariffs trickle into costs, it will jack up prices on Hermès products rather than shifting production to the U.S.
“We’re very attached to our production where it is,” he said, according to Bloomberg.
The executive chair previously dismissed comparisons to LVMH, which once tried to buy the Birkin maker, because he argued that the companies sell different products.
For Hermès, the scarcity of its bags and lasting demand have made owning their goods somewhat of a feat. But that’s not true of the more diversified family of LVMH brands.
Still, a narrowing gulf in the market value of the two marquee French companies makes it hard not to compare their performance in 2025.
While Hermès might have its distinct approach and loyal customer base to its advantage, LVMH’s scale and size could carry it through the uncertainty of the luxury market.
“LVMH is a wide-moat company with some of the industry’s biggest and strongest brands and should persevere in crisis better than most,” Morningstar’s senior equity analyst Jelena Sokolova said. “We view shares as undervalued—an interesting opportunity for long-term investors.”
This story was originally featured on Fortune.com
