Hermès Shares Rise Following Morgan Stanley's Indication of Global Price Hikes
Hermès shares are recovering from intraday lows, rising after Morgan Stanley highlighted a significant global price increase for the luxury goods company in 2025. This indicates the company's strong pricing power.
Morgan Stanley reported that Hermès has projected a global price increase of approximately 6.5% for 2025. This move emphasizes the company's ability to command higher prices compared to the industry average of around 2%. Price adjustments vary by region, with increases of 4.5% in Europe for leather goods, 7% in the U.S., and 10% in China and South Korea.
The research firm anticipates that the price increase will not deter consumer demand, owing to Hermès' strong brand appeal and its disciplined pricing strategy implemented since the onset of the pandemic.
According to Morgan Stanley, Hermès has been more conservative with price increases compared to its competitors. While rivals have cumulatively raised prices by over 50% since January 2020, Hermès' increase has remained around 28%.
This disciplined approach and the brand's continued allure suggest that the Visible Alpha consensus forecast of 10.3% sales growth at constant currency for 2025 may be conservative. Morgan Stanley's own estimate leans towards a 12.8% growth.
Morgan Stanley analyst Edouard Aubin commented on the brand's pricing strategy: "While Hermès' prices are significantly above the industry average, we expect limited pullbacks in sales volumes due to its very high pricing power."
The financial institution raised Hermès' fourth-quarter 2024 Organic Sales Growth (OSG) forecast from 11.6% to 12.6%. This figure exceeds the Visible Alpha consensus estimate of 10.5%. This revision is based on recent channel checks indicating that the brand's momentum remains strong and there may be potential acceleration in key markets like Greater China.
As a result, Morgan Stanley expects less operational leverage and projects the EBITDA margin for the second half of 2024 at 39%, implying an annual margin of 40.5%, which is higher than both its previous projections and the consensus estimate.
In light of these factors, Morgan Stanley has raised its target price for Hermès to €2,600. This increase advances the Discounted Cash Flow (DCF) analysis and implies a potential upside of 10% for the shares. The firm maintains an Overweight rating on Hermès.