Birkin Power: Hermès dethrones former suitor LVMH as France’s most-valuable company

Hermès’s market capitalization surpassed that of rival LVMH, the conglomerate which tried to buy the maker of the coveted Birkin bag in a stealth raid that shocked the French corporate world 15 years ago.

Hermès International SCA’s valuation reached €243.65 billion ($276.3 billion) on Tuesday, briefly crossing the €243.44 billion of LVMH Moët Hennessy Louis Vuitton SE. That catapulted it into the most valuable company on France’s benchmark CAC40 index and the third-largest listed company in Europe, behind software firm SAP SE and weight-loss drug maker Novo Nordisk A/S.

Shift in fortunes: LVMH shares tumble 8%

The stunning reversal in fortunes comes after LVMH tumbled as much as 8.4% in Paris following disappointing first-quarter results on slowing demand in China and the US and amid threats of an escalating trade war.

“In uncertain environments, people tend to go for quality, they tend to go for safety, and I think in luxury Hermès is clearly representing that,” said Jelena Sokolova, an analyst at Morningstar. “LVMH is a little bit more cyclical than Hermès.”

For Hermès, the move marks a vindication of its strategy to remain independent after LVMH’s controlling shareholder and billionaire CEO Bernard Arnault revealed in 2010 that he had quietly amassed a stake in the famed maker of silk scarves.

Arnault’s move prompted Hermès family members to join forces, and eventually drive the man dubbed “the wolf in cashmere” for his often-ruthless takeovers of storied heritage brands to sell his shares a few years later.

LVMH, which owns labels including Christian Dior and Tiffany & Co, reported sales in 2024 of €84.7 billion for an operating profit of €19.6 billion. Hermès had sales of €15.2 billion and an operating profit of €6.2 billion in the period.

How Hermès braved fall in demand for luxury goods?

Hermès has weathered the downturn in demand for luxury goods better than rivals by catering to the wealthiest and by cultivating a finely calibrated sense of exclusivity and managed scarcity.

The supply-constrained business model has ensured that demand for its handbags like the Birkin — named after the late British singer-actress Jane Birkin — and the Kelly — inspired by Princess Grace Kelly — outstrips what’s on offer.

These bags can sell for about €10,000 in Paris and can fetch much higher prices on the resale market. Founded as a harness-maker in 1837, Hermès enjoys strong pricing power and waiting lists for its products.

“Hermès is seen as more resilient in certain environments, which are more uncertain, and that’s exactly what is happening right now,” said Morningstar’s Sokolova.

LVMH’s valuation may also be hurting from what analysts say is a conglomerate discount, with assets such as Sephora enjoying lower margins than its cash cow brand Louis Vuitton.

On Monday, LVMH posted first-quarter results that were much worse than expected at its key fashion and leather goods unit. Hermès will publish its quarterly sales Thursday.

While Arnault often dominates the world’s richest list — he currently ranks fifth on the Bloomberg Billionaires Index — the Hermès family, whose sixth generation heir Axel Dumas runs the saddle maker, is Europe’s wealthiest with an estimated fortune of about $171 billion as of December.

In February, Hermès’s valuation briefly crossed a symbolic €300 billion mark, but concerns about a trade war have since hurt the wider luxury sector.