Shares of Hermes declined sharply after the French luxury goods maker reported slower-than-expected sales growth for the third quarter ending September 30, citing weaker demand in China and heightened security challenges amid protests in France. The company’s sales increased 4.3% year-over-year to £3.4 billion, falling short of analyst forecasts that had anticipated a 5.2% rise. This marked the slowest quarterly growth for Hermes since 2020, when the COVID-19 pandemic forced store closures and halted global travel.

Investors reacted negatively to the results, sending Hermes shares down 4.9%, contributing to a nearly 40% drop in the stock’s value so far this year. The luxury sector has been grappling with economic headwinds in China, where government measures targeting the ultra-wealthy have dampened spending. Hermes described market conditions in China as “unfavourable,” and sales in the Asia-Pacific region remained flat for the quarter. Additionally, sales in the Middle East declined 4.5%, reflecting disruptions caused by ongoing conflict in the region.

The company also highlighted the impact of recent unrest in France. A Hermes store in Marseille was looted during cost-of-living protests occurring across the country. In response, the company has enhanced security at its French locations, though Chief Financial Officer Eric du Halgouet noted it is still too early to fully gauge the effects on store operations and tourism.

Despite these challenges, Hermes saw continued strong demand for its top-selling leather handbags, with sales in this segment up 10.8%. However, the company reported softer performance in its fashion and accessories division, which includes silk scarves, where sales declined 2%. The mixed results reflect a complex environment for luxury brands, grappling simultaneously with geopolitical tensions, shifting consumer behavior, and regional economic pressures.