Footfall in Middle Eastern malls has halved — and it cost LVMH a percentage point of sales
The shares fell 3%, and are down 27% since the start of the year. “If they are doing everything right and still cannot move the needle, that says something about the health of the whole sector.”
LVMH shares fell 3% after first-quarter sales were hit by the war in Iran: spending by Middle Eastern shoppers declined, and the long-awaited recovery of the luxury sector’s leader has been pushed back again.
The group, which owns 75 brands including Louis Vuitton, Dior and Tiffany & Co, said the conflict cost it at least one percentage point of global sales, because of weak spending in Gulf retail hubs such as Dubai. The stock is down 27% since the start of the year: hopes of a rebound in demand have faded, and the destruction and inflation caused by the war have created a fresh obstacle to growth.
LVMH chief financial officer Cécile Cabanis said footfall in shopping centres in the Middle East, which accounts for about 6% of group turnover, initially fell by between 30% and 70%, roughly halving on average. “What we are seeing today is that demand is still sharply reduced,” she said. LVMH discloses profit only in its half-year results in July, but Cabanis warned of a probably heavier hit to margins: the Middle East is “a fairly profitable market.” The conflict also affected Europe, where sales fell 3%.
“It remains clear that 2026 is a transition year for LVMH,” says Ben Lambert, a European equities portfolio manager at Ninety One. “But for the stock, that is already in the price.”
Kevin Thozet, a portfolio adviser at Carmignac in Paris, notes that rising energy prices and mortgage rates are likely to squeeze demand from the middle class — luxury’s “aspirational” shoppers — while weaker equity markets could hit spending by wealthy Americans too. “The question is whether we are simply deferring the problem because of what is happening in the Middle East, pushing recovery expectations out by a quarter or two, or whether this is something more substantial.”
Berenberg analyst Nick Anderson puts it more bluntly: “LVMH is, I think, one of the best-managed groups in the sector, and if they are doing everything right and still struggling to move the needle, that says something about a broader malaise in the industry.” He adds that the euro’s strength against the dollar hurt first-quarter sales and could keep weighing on demand: fewer tourists are coming to Europe to buy bags and fragrance. “In the second quarter that will still be a big problem.”
Investors are now waiting to see how the war has affected the others: Kering reports after the market close, Hermès on Wednesday morning. Both groups are estimated to be slightly less exposed to the Middle East than LVMH.