The European luxury sector, tracked by Goldman via GSXELUXG, came under continued pressure on Thursday after French luxury giant Hermes added to the gloom with a disappointing Q1 earnings report, following LVMH Moet Hennessy's shock results just a day earlier. Most notably, a slowdown in Chinese demand is rippling through the industry — prompting one Goldman analyst to warn: "Luxury is late cycle."

Hermes' first-quarter earnings report was mixed to say the least, with growth in Europe, Japan, and the Americas, but disappointing results in Asia and key segments like Watches and Perfumes.

Here's a snapshot of the first quarter report with estimates provided by Bloomberg: 

Total sales growth: +7.2%, missed Bloomberg Consensus of +7.89%

Revenue: €4.13B, +8.5% y/y, just shy of €4.16B estimate

Segment Performance:

• Leather Goods: +10.0% (vs. est. +10.8%) — Slight miss, still strong double-digit growth

• Watches: -10.0% (vs. est. -3.9%) — Deep miss, weakest segment

• Perfumes: -0.5% (vs. est. +7.06%) — Sharp disappointment

• Silk & Textiles: +4.5% (vs. est. +3.64%) — Beat

• Ready-to-Wear & Fashion: +7.2% (vs. est. +9.34%) — Moderate miss

Regional Breakdown:

• France: +14.2% (vs. est. +10.3%) — Strong outperformance

• Europe (ex-France): +13.3% (vs. est. +13.1%) — In line

• Japan: +17.2% (vs. est. +12.7%) — Significant beat

• Asia Pacific: +1.2% (vs. est. +4.02%) — Weak

• Asia (total): +3.7% (vs. est. +5.39%) — Soft demand in China likely a drag

• Americas: +11.0% (vs. est. +8.55%) — Strong outperformance

Axel Dumas, Executive Chairman of Hermes, released comments about the challenging macroeconomic environment: 

"In a complex geopolitical and economic context, the house is strengthening its fundamentals more than ever: uncompromising quality, creativity at the heart of all development, and vertical integration, a guarantee of preserving unique savoir-faire. Despite a high comparison basis in the first quarter, the group achieved solid growth in sales, thanks to the trust of its customers and the commitment of the teams, whom I thank warmly." 

Hermes' uninspiring quarterly report builds on LVMH's first-quarter results yesterday, which served as a luxury gut-check for the industry. The miss was broad-based across segments and regions, led by sliding demand in key markets, including China and the U.S. Fashion and Leather Goods—the group's growth engine—also stumbled, signaling concerns about a wider slowdown in the high-end consumer space. 

Commenting on Hermes, but more importantly, the broader industry, Goldman analyst Natasha de la Grense warned, "Luxury is a late cycle." 

Here's more from the analyst:

Commentary from other analysts:

Barclays (overweight)

• Hermes reported a slight miss on its first-quarter sales update, analyst Carole Madjo writes, though all regions saw robust growth

• Growth in its leather goods division should be driven by a price increase and volume contribution in 2025, so it should pick up throughout the year

CIC Market Solutions (neutral)

• Hermes saw a solid start to the year which confirms its status as a safe haven, says analyst David Da Maia

• Its unique status is "highly valuable" in a backdrop that has become very uncertain, and has been reflected in its premium to the luxury sector

Bernstein (outperform)

• Tough comparisons in China weigh heavily, but should get better as the year progresses, says analyst Luca Solca

• Category mix confirms a slower consumer demand environment; watches again are the weakest link in the Hermes lineup

Stifel (buy)

• Lighter-than-expected growth in Asia Pacific overshadowed solid growth in the Americas, France, Europe ex-France and Japan, writes analyst Rogerio Fujimori

• Share-price weakness offers opportunity to buy ahead of growth re-acceleration for leather goods in the second and third quarters

Citi (neutral)

• Hermes continues to outperform with resilient sales, says analyst Thomas Chauvet, noting continued double-digit growth in all regions but Asia ex-Japan

• Notes that U.S. tariffs will be fully offset with pricing from May 1

Jefferies (buy)

• Hermes's first-quarter organic growth confirms the resilience of the group's model, even if it may be slightly below buyside ambitions, says analyst James Grzinic

• The 2025 price rise in leather will have helped, but also provides a good sense for Hermes's pricing power at a time when tariffs, as well as euro strength, are likely to represent mounting gross margin challenges

Bloomberg Intelligence

• Hermes's 1% Asia Pacific-excluding-Japan sales gain in the first quarter dragged otherwise robust low double-digit constant currency growth elsewhere, writes analyst Deborah Aitken

• Slowed China store traffic in April could see more trimming to consensus

For the first time in decades, Hermes's market cap exceeded LVMH's this week.

The theme sticking here is Goldman's "Luxury is late cycle."