Dubai is no longer a gold mine: luxury sales down 30–50%

Sales at the largest European luxury brands have fallen in Dubai and Abu Dhabi: the conflict with Iran has hit the sector’s fastest-growing market. For a $400 billion industry whose value has been contracting for three years, it is another blow.

In March, brands reported sales down 30–50% at the Mall of the Emirates, one of Dubai’s largest shopping centres, compared with the same month last year. Footfall at the mall itself — where LVMH’s Louis Vuitton and Dior sit alongside Kering’s Gucci, Richemont’s Cartier, Chanel and Rolex, as well as an indoor ski resort and a wellness clinic — fell 15% in March. At the larger, tourist-heavy Dubai Mall, visitor numbers roughly halved, pointing to an even steeper drop in sales. In Abu Dhabi, which is less dependent on tourists, March sales at the Galleria mall held up better but still fell by around 10%.

The companies that operate the Mall of the Emirates, the Dubai Mall and the Galleria did not respond to requests for comment. LVMH, Kering and Hermès likewise did not respond to questions about Middle East sales and the impact of the conflict.

Since the end of the luxury boom in 2022, when China failed to recover from the pandemic, the combined market capitalisation of LVMH and Kering has fallen by more than €100 billion — more than a quarter of their value. Industry-wide sales fell 2% last year, according to Bain & Company.

The Middle East, which accounts for roughly 5% of global luxury consumption, was one of the rare bright spots: in recent years it has delivered double-digit annual revenue growth, notes Carole Madjo, head of luxury goods research at Barclays. “It was unquestionably a strategic region. Everything was fine.”

Dubai’s carefully constructed image as a place of glamour and stability has been shaken by the conflict, which began with US and Israeli strikes on Iran on 28 February. The city’s main aviation hub has repeatedly been targeted by Iranian drone attacks, along with other infrastructure, and the facade of the landmark Burj Al Arab hotel was damaged by debris after a drone was intercepted. A return to normal will take months, even if diplomacy works soon.

Analysts at Bernstein warned that the conflict’s knock-on effects — higher oil and travel prices, inflation, a possible stock market slump — could “easily undermine” buyers’ appetite beyond the Gulf as well, particularly in the US. “If it now turns out that the luxury recovery we had hoped for in 2026 will not happen and shifts at best to the second half of the year or to next year, it is unlikely that anyone will be surprised,” says Christopher Rossbach, portfolio manager at J Stern & Co.

Because the region is relatively small, the immediate effect on quarterly sales will be limited. The impact on profit, which most listed luxury groups disclose only twice a year, could be far greater, Rossbach notes. The reason is simple: with low rents and labour costs, higher retail prices than in other regions and virtually no taxes, Dubai is one of the most profitable selling locations in luxury. For megabrands such as Louis Vuitton, Hermès or Chanel, annual revenue per square metre here can exceed several hundred thousand euros — many times the global average.