When Hermès' quarterly growth slips from double digits to single digits, the market's first instinct is to predict a luxury chill. But zoom out, and the ripples of this data change are traveling down the supply chain—through cashmere combing, silk weaving, and high-count cotton spinning—into the workshops of China's high-end fabric makers. For domestic textile companies accustomed to supplying top luxury brands, this is both a warning and an opportunity to recalibrate their client portfolios.
Background
According to Hermès' latest earnings report, its global sales growth has slowed to single digits, a notable decline from the double-digit growth of previous quarters. The slowdown in China was a key factor dragging overall performance. Despite this, Hermès still significantly outperforms LVMH and Kering, some of which have seen negative growth in certain markets. This state of 'slowing but leading' is viewed as a litmus test for high-end consumption resilience.
For China's textile industry, Hermès' performance is more than a barometer for luxury. Its core leather goods use top-grade hides, its silk scarves use fine twill, and its ready-to-wear lines require high-wool and cashmere—much of which is sourced from Chinese suppliers or processed in Chinese factories. The phrase 'slowing growth in China' directly correlates with marginal changes in these factories' order books. A production line running at full capacity a quarter ago may now face gaps as brands lower inventory expectations.
More intriguing is the signal of 'narrowing premium.' When the price gap between Hermès and second-tier luxury brands shrinks, consumers may switch to alternatives, indirectly affecting brand demand for high-end fabrics. For domestic textile mills serving multiple luxury brands, this means divergent order volumes—top brands may remain stable, while mid-tier brands become more cautious.
Industry Impact
From a supply chain transmission perspective, the impact of luxury earnings typically lags by one to two quarters. Brands adjust procurement based on sales forecasts, which then flows to fabric suppliers and manufacturers over three to six months. Thus, Hermès' current slowdown will actually impact fabric orders for Fall/Winter 2025 and even early Spring/Summer 2026 collections. High-end fabric companies should adjust capacity plans for next year accordingly, rather than focusing solely on current orders.
Notably, Hermès emphasized China's long-term potential in its report and continued investing in store renovations and capacity expansion. This suggests that despite short-term slowdown, brand reliance on Chinese supply chains remains undiminished. For textile companies with scarce craft capabilities (like hand printing or special finishing), this is a window to consolidate partnerships—brands during slowdowns prefer to deepen ties with core suppliers offering stable quality and flexible delivery.
However, price pressure from slowing growth cannot be ignored. To protect margins, luxury brands may push upstream for lower prices, squeezing fabric order unit prices. Data from the China National Textile and Apparel Council shows that in 2024, profit growth among scale-up textile enterprises diverged, with high-end product lines remaining relatively strong, while mid-to-low-end products faced intensified homogenized competition. If Hermès' 'slowdown' triggers industry-wide expectation adjustments, this divergence may widen, leaving smaller suppliers with weak bargaining power most vulnerable.