Hermès’s Quiet Reign in Luxury

In a twist worthy of a luxury legend, Hermès, the stoic French saddle‑maker turned couture house, quietly became the world’s most valuable luxury company. In April 2025, its market capitalisation climbed to nearly €249 billion, just edging out LVMH’s roughly €244 billion. Fifteen years after fending off a stealth takeover bid by LVMH, the Birkin and Kelly emporium now sits atop Europe’s luxury summit. This isn’t just a blip in the stock ticker it reveals a deeper shift. Today’s affluents and investors seem to prize craftsmanship, scarcity and brand discipline over mere scale, and Hermès’s strategy has proven better suited to the wobblier world of 2025.

The Art of the Product

Hermès built its empire on a fierce devotion to craft. As former CEO Jean‑Louis Dumas put it, “We don’t have a policy of image, we have a policy of product”. Every Hermès object is almost a little miracle of human labour: most are made entirely by hand, often by a single master craftsperson. Its famous silk scarves come from the company’s own silkworm farms, its bags are assembled stitch by stitch, and every final design is personally signed off by creative directors. This obsession with quality, from its ateliers to its legendary patience, keeps Hermès firmly in the “ultra‑premium” lane. There are no mass‑produced lines or outlet stores; in fact, Hermès famously has no formal marketing department at all. Instead, the brand’s story is told through product and pedigree. The aura of human touch, the sense that each Birkin reconnects a buyer to the hands that made it, has become Hermès’s secret signature.

In short, Hermès is a branded house built around one single legend. By contrast, LVMH is a sprawling house of brands. Louis Vuitton, Dior, Givenchy, Tiffany and over 70 others all live under LVMH’s umbrella. While this breadth drove massive sales (LVMH’s revenues are easily 5–6 times Hermès’s), it also means complexity. Hermès sells only in its own boutiques, each store a curated shrine to elegance allowing full control of pricing and experience. LVMH, on the other hand, pushes its brands everywhere, from flagship stores to department counters and duty‑free halls. That global reach boosts volume but invites a “conglomerate discount”: analysts note that lower‑margin arms like Sephora drag on the group, so the market values LVMH less richly than a purist luxury house. Moreover, Hermès makes almost everything in France, emphasizing heritage authenticity, whereas LVMH has faced scrutiny for outsourcing some production to Asia. The Hermès way is to tighten the circle around its brand: everything reinforces scarcity, purity and independence.

Scarcity and Sovereignty

At Hermès, exclusivity isn’t an accident, it’s a strategy. The company deliberately undersupplies demand. Leather goods output grows by only about 6–7% each year, and flagship products have long waiting lists. Customers can’t just walk out with a Birkin off the shelf, instead, the house “rations” access. This managed scarcity ensures that demand forever outstrips what’s available. The result is a powerful paradox: the harder it is to buy, the more people yearn to. Hermès’s queues and calibrated releases create cachet, pushing collectors to seek “consolation” Hermès items (wallets, belts, scarves) if the big bags elude them. In essence, Hermès has made low supply a selling point, a permanent flash sale of mystique and scarcity. In today’s market that has translated to pricing power: Birkin bags routinely sell for around €10,000 at retail (and much higher on the secondary market), while customers wait months or years for delivery. It’s a far cry from the volume tactics of other brands: no one at Hermès will ever say, “Let’s just print more orange boxes.”

Hermès’s pricing discipline extends beyond inventory. The brand raises prices only modestly, even in inflationary times. In 2025 it has only hiked global prices by about 7%, with no new increases imposed in the U.S. after an extra 5% tariff was added in May. (Axel Dumas, Hermès’s executive chairman, has signalled that’s enough for now.) This restraint reflects a long-term view: Hermès cares more about enduring desirability than short-lived sales spikes.

Divergence: Hermès vs. LVMH

All this plays out dramatically in the current luxury landscape. In 2025, consumers especially the global ultra‑wealthy are increasingly choosy. Morningstar notes that LVMH’s customer base skews toward aspirational segments (tourists, middle‑rich buyers), which are feeling the economic squeeze. Hermès, by contrast, caters to a "wealthier client base" that is relatively insulated from downturns. Analysts say this partly explains why Hermès has held firm: its very high‑end clientele simply kept buying high-ticket pieces even as broader luxury demand cooled. LVMH’s latest quarters told a different story. Its Q1 2025 sales fell short (down ~3% year-on-year), dragging the share price down ~8% and briefly costing it the No.1 crown. Morningstar’s Jelena Sokolova observed that LVMH’s heavy exposure to “lower-end” luxury made it more vulnerable than the niche Hermès.

Put another way, scarcity and quality are outperforming scale and variety right now. Bloomberg and Reuters commentaries have called Hermès’s leap over LVMH “quite telling” for the post-post‑Covid era. The fashion labels in LVMH’s stable did win market share after the pandemic, but with slowing markets they’re feeling pressure again. Investors now prize businesses with high margins and stable cash flows qualities Hermès embodies (stable 6–7% output growth, minimal debt, astronomical P/E ratios). As Konvi’s analysis puts it, in a cautious environment, luxury is being viewed not just as indulgence but as “alternative assets” and Hermès, with its storied logos and Birkin assets, looks more like a gold bar than a gadget to many.

Weathering Asia’s Downturn

If there’s one arena where this difference matters, it’s Asia. The Chinese consumer slowdown aggravated by property troubles and higher interest rates, has cooled luxury spending across the board. LVMH’s spring sales suffered accordingly, with China and even the U.S. underperforming. Hermès was not immune to slower foot traffic in Shanghai or Hong Kong, but its experience was relatively painless. In Q3 2024 Reuters reported Hermes still saw revenue rise ~11%, noting that “luxury handbags lure wealthy shoppers” and that the richest buyers tend to be more immune to economic jitters. Indeed, Asia‑Pacific (ex-Japan) sales for Hermès edged up only ~1%, but that was enough, every division but watches beat forecasts, buoyed by its classic designs and tight inventory management. Hermès’s CFO remarked that Chinese store traffic “hasn’t been interrupted [further] after the Chinese New Year”, in other words, no fresh collapse despite the gloom.

Meanwhile, Hermès shifted focus to alternative growth pillars. In 2025 it opened new stores (e.g. in Nashville and Shenzhen) and invested in high-margin categories. Its US business saw footfall increase, even as local economies were rocky. The label leaned into jewelry, watches and men’s tailoring (strong among wealthy Chinese travelers) to offset any dip in scarves or entry-level goods. This approach contrasts with some of LVMH’s peers: Kering (Gucci) and Chanel have warned of double-digit profit drops on China weakness, while Hermès’s declines have been single-digit.

Notably, Hermès’s cautious consistency sometimes looks dull beside turnaround stories. In late 2025, a few investors reportedly found its steady discipline “unexciting,” as it refuses to flood the market or pursue quick fixes. But that very discipline is what kept Hermès afloat. Its leather goods grew ~13% even in a slow quarter, and it is now deliberately ramping up inventories ahead of peak seasons, a sign of careful pacing, not panic.

The Road Ahead

Hermès’s new summit is more than a market quirk; it hints at where luxury may be headed. The ultra‑wealthy of 2025 seem to crave more than logos; they want lineage, narrative and rarity. Hermès’s craftspeople, archives and century‑old heritage offer an emotional connection that resonates in uncertain times. Investors are even treating Birkin bags like collectables with appreciating value. In this sense, a Hermès handbag today is part fashion trophy, part informal bond.

For luxury brands big and small, the lesson is clear: the future belongs to those who tell deep stories with their products, keep stock short, and price with conviction. LVMH’s multi‑crown empire took pride in ubiquity and breadth; Hermès’s quieter house bet on depth and scarcity. In 2025’s reshuffled order, it’s the latter philosophy that’s on top.

• Craftsmanship as currency: Hermès’s emphasis on hand-made heritage, every item personally overseen by artisans, deeply resonates with high-end buyers who prioritise authenticity and touch.

• Scarcity as strategy: By strictly limiting production (roughly 6–7% annual growth) and enforcing long waiting lists, Hermès has turned exclusivity into a competitive edge. Analysts now cite this deliberate under-supply as a “defensible moat” around the brand.

• Resilience over scale: In uncertain times, Hermès’s disciplined, single-brand model has outperformed LVMH’s sprawling empire. This shift suggests luxury consumers and investors are rewarding focus, disciplined pricing and brand story – a reminder that sometimes less is truly more.

As luxury’s new leader, Hermès stands as proof that in 2025, the oldest secrets of artistry and scarcity are worth more than ever.