Summary of Key Points
Hermès’ revenue in the second quarter of 2026 fell slightly short of analysts’ expectations, with the Chinese market being in the spotlight: The CEO views the Chinese market as “stable but not yet rebounding, with an uncertain outlook.” He uses two “specific indicators” – real estate prices and pork prices – to assess consumer trends. Growth in the Chinese market relies on the loyalty of existing customers (with strong performance in categories such as jewelry and perfume), which is different from the growth drivers of Burberry (driven by Generation Z) and Hang Lung Mall (focusing on mass consumption). Although the Chinese market remains important (Hermès continues to expand there), consumers are more discerning about quality, and local brands are becoming increasingly competitive, making the market more complex.
Hermès’ Three Key Assessments of the Chinese Market
The Hermès CEO summarized the Chinese market in three terms:
1. Tending to be stable: The Chinese team has performed well, and sales continued to grow in the second quarter; Hermès is now the number one luxury brand in China (it wasn’t before the pandemic), although the growth rate hasn’t returned to its previous levels, so it’s considered “stable.”
2. Yet to rebound: Growth in the Asia-Pacific region (excluding Japan) was only 2.5% in the second quarter (below the expected 3.3%), with the Korean market growing faster; the CEO acknowledges that there are no clear signs of a demand recovery.
3. Uncertain outlook: Although China remains a “solid foundation,” the future direction is uncertain due to significant fluctuations in retail sales data this year (0.2% growth in April, negative growth of 0.6% in May, and only a 1% increase in June; even retail sales in Beijing and Shanghai declined in June).
Two “Practical” Indicators for Assessing Chinese Consumer Behavior
The CEO didn’t use complex economic terms but focused on two things that ordinary people understand:
1. Real estate: Most Chinese people’s wealth is tied to their homes; when housing prices fall, people tend to save more and spend less (since their assets have depreciated). The CEO explained this as a result of affected income, not a lack of desire to spend.
2. Pork prices: He noted that pork prices are an indicator of consumer sentiment: since pork is often used in celebrations and gatherings, lower prices suggest that people are eating out less and celebrating less, indicating a weaker willingness to spend. The CEO hopes for higher pork prices as it would indicate an improvement in consumer mood and a greater willingness to purchase luxury goods (Hermès sells a sense of pleasure).
Drivers of Growth in the Chinese Market
Different brands and malls have different growth strategies:
- Hermès: The fastest-growing categories are jewelry, perfume, and silk, thanks to the loyalty of its core customers (rather than attracting new customers).
- Burberry: Growing rapidly among Generation Z.
- Hang Lung Mall: Previously focused on luxury goods, it now relies on mass dining and sports brands as equally important revenue sources.
This highlights the differentiated performance of various consumer groups: while premium customers remain stable, younger consumers and the general public are more volatile in their spending patterns.
The Chinese Market: Still Important, but No Longer a “Easy Profit” Source
All luxury brands and malls agree on two key points:
1. Critical importance: Hermès has renovated its Hong Kong store and opened a new one in Beijing this year, with plans to open another in Chengdu later on; the Gucci parent company, Kering Group, considers China a “top strategic priority.”
2. Increasing complexity: Brands used to see China as a easy source of profit (e.g., Gucci once used China to dispose of excess inventory); however, this is no longer the case. Chinese consumers now place more emphasis on quality, design, and experience when making purchases. Local brands (such as Lao Pu Jin, which saw sales decline in the second quarter but were once very popular) are also becoming more competitive, requiring greater effort in product development and service delivery.
Conclusion: Confidence Is More Valuable than Luxury Goods
The CEO’s remarks provide reassurance to the industry: despite fluctuations in the Chinese market, the foundation remains solid, and there are clear indicators (such as real estate and pork prices) to monitor consumer sentiment. Ultimately, hope and confidence are far more valuable for the economy than any luxury product.