LVMH Reports Q1 Sales Drop Amid Middle East Conflict

LVMH, the French luxury giant, reported a 1% decline in quarterly sales on Monday, attributing part of the impact to the ongoing war in Iran and its effect on Middle Eastern markets. The conflict led to a negative impact of around 1% on total group sales, with significant drops in mall traffic and tourist spending.

Sales at luxury brands in Dubai's Mall of the Emirates fell by as much as 50%, according to Reuters. Footfall at the larger Dubai Mall was down about 50%, indicating a potentially even larger sales drop. In Abu Dhabi, March sales at the Galleria mall were more resilient but still down about 10% across the board.

The luxury industry, valued at $400 billion, has been struggling with stagnation for over two years. The Middle East had been one of the sector's rare bright spots, reporting double-digit annual revenue growth in recent years. However, the conflict has shaken Dubai's image of glamour and stability.

Despite the challenges, demand in the United States remained strong, with U.S. sales showing 3% organic growth. Analysts still predict that 2026 will be a year of luxury growth after over two years of stagnation. LVMH's shares have dropped by 26% since the start of the year, making it one of Europe's worst large-cap performers.

Gucci, another major player in the luxury market, saw an 8% drop in sales from January to March, marking its 11th straight quarterly decline. The brand's sales were slightly below analyst forecasts, with the drop attributed to the Iran war and international travel disruptions. Kering CEO Luca de Meo is set to unveil a strategic plan to turn around the group's fortunes.

Investors are pinning their hopes on de Meo's ability to navigate market jitters and shifting trends. However, most analysts expect Gucci to return to growth only in the second half of the year. Kering's shares are down about 8% this year. The Middle East conflict has further complicated the nascent turnaround efforts.

Hermès also reported weaker-than-expected first-quarter sales, with a 5.6% increase, lower than analysts' consensus of 7.1%. Sales in the Middle East fell by 6%, from €185 million to €160 million. Chief Financial Officer Eric du Halgouet noted that sales in luxury malls in Dubai and other Gulf shopping hubs dropped by 40% in March. The U.S. was a bright spot, with currency-adjusted sales up 17.2%.

Currency fluctuations took €290 million off Hermès' revenue in the quarter, leading to a 1% drop in reported sales to €4.07 billion, from €4.13 billion a year ago. The company's exclusivity and controlled production have made it resilient, but even it was not immune to the conflict's impact.