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PARIS – Forget GDP and economic headwinds. At Hermès International, the real barometer of luxury demand is the stock market, said executive chairman Axel Dumas.

The company extended its run at the head of the luxury pack in the fourth quarter, with near double-digit organic growth rates even as rivals such as Kering continue to struggle in a softer luxury market with slowing demand and consumer fatigue over pricing.

On a conference call with analysts, Dumas pointed specifically to the wealth effect in China as the country “digests” its real estate crisis.

“The appetite for spending on luxury items has got nothing to do with GDP but rather has a lot to do with the stock exchange and the change in the real estate market,” he said, indicating that equity performance and property values, more than macro numbers, are increasingly driving purchases among Hermès’ core clientele.

Dumas’ comments come as luxury grapples with an increasingly fragmented global landscape.

But don’t count out the middle class just yet, said Dumas.

While much of the sector has blamed slowing growth among aspirational middle-class shoppers, he cautioned against pushing the European cost-of-living crisis to the rest of the world.

“It’s not true that the middle class is suffering all around the world. It is true in France, for sure, but not everywhere,” he said, pointing to continued wealth creation in South Asia and Latin America, as well as momentum in the United States.

Japan, where the stock market has been on a record-breaking spree, remained a bright spot, with sales up 11.2 percent in the fourth quarter. In the booming Middle East, sales vaulted 13.5 percent.

“Constructive commentary on middle-class consumers outside of France and a ‘return to normal’ point to a rosier global demand horizon than most investors currently envisage. Hermès seems well-equipped to move towards this horizon, even if investors remain unconvinced and ‘business at usual’ fails to truly excite,” said Bernstein analyst Luca Solca.

Solca said that while the U.S. and Japanese markets have seen luxury buoyed by soaring asset prices spread more broadly across the middle class, China’s recovery leans heavily on wealthier consumers invested in the stock market and real estate.

“When you look at the rich consumers, the amount of income they make is small relative to the amount of wealth that they have, and so if they feel good, it’s primarily driven by asset prices,” he said, noting that middle-class buyers remain far more salary-dependent.

For China to continue to grow, young consumer confidence will need a boost. “They have a perception of their career opportunities to be significantly more muted than they were in the past. And that is connected to GDP, not to asset prices,” he said.

Solca added that Hermès’ focus on the ultra-high-end has insulated it from headwinds affecting more aspirational businesses like Kering, which flocked to streetwear but now has “to reposition and relaunch their brands” amid younger consumers’ tighter spending.

He also noted that the dip in the crypto market has not yet hit luxury demand in the U.S., but could be a concern in the future.

While many investors chase high-risk, high-reward opportunities in this macroeconomic context, Hermès stands out as a dependable performer, delivering consistent results even in a volatile market, he added.

The company’s stock price nudged up 2.6 percent to closes at 2,174 euros in Paris on Thursday.

Overall, revenues in the three months to Dec. 30 reached 4.09 billion euros, up 9.8 percent at constant currency, staying on pace with the previous quarter.

The French company handily outpaced analysts’ expectations, which had forecast growth at constant currency to come in at 8.4 percent.

Hermès’ position at the top of the ultra-luxury segment remains supported by brand equity, a loyal clientele and the company’s tight control over production and distribution with its vertically integrated model.

By contrast, sales at rivals LVMH Moët Hennessy Louis Vuitton were up just 1 percent at constant currency, while Kering fell 3 percent in constant currency, in the fourth quarter.

Analysts agreed that the French house’s brand equity continues to push it past its peers in an increasingly K-shaped market.

“The recovery is expected to be uneven, with performance diverging sharply by brand,” with Hermès at the top of the pack and well positioned to capture the recovery, said Third Bridge analyst Yanmei Tang, who forecasts “modest” luxury growth of 3 to 5 percent for the coming year.

RBC analyst Piral Dadhania said: “In tougher periods of luxury demand, which is the sector setup currently, Hermès’ relative defensiveness is more attractive as it is likely to suffer less than peers, given its absolute luxury brand positioning and supply constrained model for its most coveted products.”

The company’s “elevated and non-replicable brand positioning” as well as vertical integration and artisanal quality continue to put it at the head of the pack, added Dadhania, who believes the company will continue to outperform.

Hermès increased its prices by 5 to 6 percent in January, a move that was “calibrated to cover our production costs,” said chief financial officer Eric de Halgouët, noting the boost reflects higher raw material costs such as gold.

Despite recurring speculation about scarcity, Hermès continues to expand handbag production at a measured pace of around 6 to 7 percent annually. A new leather goods workshop opened in January, with three more scheduled through 2030. The group is also investing in watchmaking capacity and constructing a new site for tableware.

“We are quite confident that [level of] growth can be sustained in the near future,” Dumas said, noting that capacity planning extends through the end of the decade.

Leather goods remained the primary engine of growth in the quarter, rising 14.6 percent, while ready-to-wear and silks both increased 7.1 percent. Jewelry and home advanced 12.9 percent. Watches, though rebounding slightly in the second half, remain under pressure amid exposure to China and increased competition from the secondary market.

The dark spot was the perfume and beauty category, which fell 14.6 percent in the fourth quarter.

Dumas attributed the sales hit to wholesale and duty-free channels.

“Contrary to the rest of the group, they depend a lot on wholesale, retail distribution in duty free, which is distributors. Not everybody is doing as well as Hermès, and sometimes you have partners that have preferred to buy less, to manage their inventory,” he said.

The slowdown is limited to fragrance rather than makeup, he emphasized, and Hermès is pressing ahead with its broader beauty strategy, which includes readying a new skin care line in the near future, though he kept mum on the timing of that launch.

While the men’s division preps for a generational handover to Grace Wales Bonner, the brand also continued to tease a new haute couture collection. Dumas confirmed the atelier is up and running, but did not reveal a launch date.

“What I saw was superb. I’m really quite excited, and I’m very proud of what the teams have done,” Dumas said. “We’ll be ready when we’ll be ready.”

Despite tariff uncertainty and inflation, momentum in the U.S. remains particularly strong.

Sales in the Americas rose 12.1 percent increase in the quarter, supported by what Dumas described as a “very broad” customer base and geographic diversification in the U.S.

Scottsdale and Nashville store openings last year have been “strong,” and California, which saw a slowdown following the catastrophic fires in Los Angeles last January, has bounced back.

Third Bridge’s Tang said, “Momentum in the United States is particularly strong, reflecting an underpenetrated market where the brand still has significant room to expand.”

Europe remains resilient thanks to its “dynamic” local customer base. The company is less dependent on tourism than its peers, Dumas noted.

China, which has been a tough market for competitors, remained positive overall at Hermès. “We’ve grown less fast than in the past, but we grew,” Dumas said, noting a drop in aspirational shoppers while the top-tier client segment continues to grow.

Dumas is positive on the future in the region. Hermès currently operates 32 stores in China and plans only gradual expansion, maintaining a long-term view. Renovation and extension projects are in the works for Macao and Jiangsu in the country, but any expansion plans will retain and slow-but-steady pace.

Sales in Asia outside of Japan ticked up 8.6 percent in the fourth quarter.

Rather than speeding up its pace of store openings, Hermès is doubling down on snapping up real estate and expanding existing flagships.

“We don’t need more stores, but we need to make bigger stores more beautiful, stores better placed, if need be, in order to present all the divisions,” Dumas said. “The idea is not to have more stores, but better stores.”

He pointed to the recent acquisition of a building on Rodeo Drive in Los Angeles, which was purchased for $400 million last summer. While he acknowledged that the current Hermès location up the street is “becoming too small” to showcase its growing collections, the recent purchase currently houses Balenciaga, Moncler and Tom Ford, which will remain in place.

The opening of a new London Maison at 166 New Bond Street is cleverly scheduled for the 16th of June – making it 16/6 to coordinate with the store’s street address, Dumas said. That property was purchased 18 years ago he added, highlighting the group’s long-term real estate strategy.

Looking at the full year, revenue reached 16 billion euros, up 9 percent at constant exchange rates. The company took a hit on the strong euro, with currency fluctuations reducing reported growth to 5.5 percent despite its strategy to hedge against currency moves.

Recurring operating income rose 7 percent to 6.6 billion euros, while net profit increased 5.5 percent to 4.5 billion euros, excluding France’s exceptional tax on large companies.

“We hope that it just happens for a couple of years, but maybe this exceptional tax will be a feature in years to come,” added Dumas, referencing France’s budget uncertainty.