Hermes surpasses LVMH as the world's most valuable luxury brand
What's the story
French luxury fashion house Hermes has dethroned Louis Vuitton Moet Hennessy (LVMH) to become the most valuable company on France's benchmark CAC40 index.
On Tuesday, Hermes International's market valuation was €243.65 billion, narrowly beating LVMH's €243.44 billion valuation.
The major shift in rankings was largely due to a disappointing first-quarter performance by LVMH, which dropped up to 8.4% in Paris amid reduced demand in China and the US, and potential trade war threats.
Strategic success
Hermes's independence vindicated
The recent market shift validates Hermes's decision to stay independent after LVMH's controlling shareholder and billionaire CEO Bernard Arnault quietly acquired a stake in the company in 2010.
The move led Hermes family members to come together and force Arnault to sell his shares a few years later.
With popular brands like Christian Dior and Tiffany & Co, LVMH reported sales of €84.7 billion for 2024 with an operating profit of €19.6 billion.
Resilience
Hermes's unique business model drives success
Hermes has weathered the luxury goods downturn better than its rivals by focusing on high-net-worth individuals and creating a meticulously curated sense of exclusivity.
Its supply-constrained business model guarantees that demand for its handbags, such as the Birkin and Kelly, outstrips supply.
These bags retail for about €10,000 in Paris and can fetch even higher prices on the resale market.
Market challenges
LVMH's valuation affected by conglomerate discount
Analysts believe LVMH's valuation could be affected by a conglomerate discount, as assets such as Sephora have lower margins than its flagship brand Louis Vuitton.
On Monday, LVMH posted disappointing first-quarter results for its fashion and leather goods division.
Meanwhile, Hermes is scheduled to announce its quarterly sales numbers on Thursday.