Hermes and Cartier Suffer Double-Digit Sales Slump in Mainland China
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Hermes and Cartier recorded double-digit sales drops in mainland China across August and September, as high-net-worth shoppers joined the broader retreat from luxury spending.
The contraction also hit the mainland’s top 25 luxury houses, pulling revenue down by double digits for labels such as Louis Vuitton and Gucci over the same two months.
Foot traffic and store receipts failed to rebound during the seven-day National Day Golden Week in early October, despite an uptick in domestic travel expenditure. That persistent weakness has prompted luxury executives across the sector to brace for a protracted downturn stretching into 2027.
Top Spenders Join Middle-Class Pullback
Luxury groups long banked on their wealthiest VIP clients to absorb the blow of an exiting middle class, whose spending power evaporated in a prolonged residential property slump. That insulation has now cracked under the weight of softer equity markets and stricter scrutiny of offshore assets by authorities in Beijing.
The simultaneous loss of entry-level aspirational buyers and very high-net-worth patrons removes the core financial buffer that protected top-tier European houses. With high-ticket categories bearing the brunt of consumer restraint, retail receipts for jewellery and automobiles dropped as much as 21 per cent in the August-September stretch, even while overall retail sales growth crawled from 0.4 per cent in August to modest gains in September.
Earnings Divergence Across Greater China
Hermes reported flat Asia-Pacific revenue for the third quarter on October 22, falling short of the 1.55 per cent growth projected by market consensus. The Asia-Pacific zone, excluding Japan, accounts for roughly 42 per cent of total group turnover for the French saddler, exposing its balance sheet directly to Chinese market softness.
“Hermes reported flat Asia-Pacific revenue for the third quarter on October 22, falling short of the 1.55 per cent growth projected by market consensus.”
For Richemont, sustained demand in regional travel hubs like Hong Kong and Macau softened some of the revenue bleed suffered by Cartier boutiques inside the mainland. Yet off-island spending remains insufficient to balance domestic showroom declines, especially as Chinese shoppers reduced their overseas spending by mid-single-digit rates over the quarter.
LVMH Moet Hennessy Louis Vuitton mirrored the downtrend with a double-digit slide in domestic China sales, dragging its broader Asia region outside Japan down 5 per cent. Kering suffered a 6 per cent drop at flagship label Gucci over the same third-quarter window, missing consensus estimates as Chinese transactions deteriorated.
The Pivot Away From Conspicuous Labels
Chinese consumers are actively reallocating personal budgets away from visible status symbols toward hospitality, experiential dining, and domestic travel. Younger demographics in tier-one cities increasingly favour understated craft over prominent monograms, accelerating the shift toward unbranded apparel and pre-owned luxury consignments.
For landlords holding high-end floor space in prime developments across Shanghai and Beijing, the downturn threatens luxury turnover rent models that depend on relentless retail volume. Department store operators face mounting inventory overhangs and may be forced to negotiate revised concession terms if mainland volumes continue falling.
The downturn gained momentum after June, when a broader consumer slowdown spread into previously resilient categories. The trend worsened through late summer, confirming that the defensive moats built around heritage brands like the Birkin maker could not deflect local macroeconomic strain.
Challenging Comparisons Extend Toward 2027
Eric Du Halgouet, chief financial officer at Hermes, confirmed during an earnings briefing that China’s operating landscape faces head-to-head pressure from sluggish financial markets and ongoing tax-related scrutiny. Rather than an immediate rebound, analysts expect lower baseline figures in 2026 to produce statistical improvements in reported growth by 2027 without resolving structural shifts in domestic consumer confidence.
Brand heads are now recalibrating store expansion budgets across mainland tier-two cities, while waiting to decide whether to reallocate marketing capital.
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