PARIS, April 13 (Reuters) - French luxury giant LVMH suffered a heavy impact from the Middle Eastern conflict https://www.reuters.com/world/iran/,
LVMH reports sales hit from Iran war in blow to hopes for luxury revival
By Tassilo Hummel
Impact of the Iran War on LVMH's Sales and the Luxury Sector
PARIS, April 13 (Reuters) - French luxury giant LVMH said the Iran war shaved at least 1% off its total group sales in the last quarter due to lower spending in the Gulf region, and that fewer tourists in Europe added to the weakness.
The news from LVMH, the first large luxury company to report first-quarter sales, is likely to increase investors' worries about the Gulf conflict’s https://www.reuters.com/world/iran/ impact on a nascent recovery in the $400 billion luxury industry. LVMH’s U.S.-listed shares fell 3.75% and Gucci owner Kering’s shares were down 1.5%.
Global quarterly sales at the owner of brands including Louis Vuitton and Dior, Bulgari jewellery and Hennessy, rose by 1% when adjusted for currency swings, slightly below analyst estimates of a 1.5% rise, according to a Visible Alpha consensus.
The group's finance chief Cecile Cabanis said the situation in the Middle East has not markedly improved since the heavy disruption seen in shopping hubs at the start of the war. "What we see today is still that demand is very much down."
Middle East Crisis Slows Nascent Luxury Recovery
MIDDLE EAST CRISIS SLOWS NASCENT LUXURY RECOVERY
Sales Decline in the Gulf Region
Reuters reported nL6N40J13L that mall sales in Dubai fell by as much as 50% since U.S.-Israeli attacks on Iran at the end of February began the latest conflict in the Middle East. Sales of luxury cars nL1N4050WL are also under threat.
Cabanis said mall traffic in a region representing 6% of LVMH's turnover had initially dropped by between 30% and 70%, citing 50% as an average.
"What you have to take into account is that Middle East is quite a profitable market...If you lose 1 euro in sales, you probably lose a bit more in your margin," she added.
European Sales and Currency Effects
The conflict also weighed on sales in Europe, which were down 3%, because of the strong euro, as well as the conflict, LVMH said.
"We have already seen two or three years of (luxury sector) crisis," said Laurent Chaudeurge, a member of the investment committee at Paris-based asset manager BDL.
"And just as we were hoping to get out of the crisis, it hits back with the Middle East."
Outlook for Luxury Industry Recovery
Most analysts still say 2026 will be a year of luxury growth, including for LVMH, after more than two years of stagnation. LVMH said most categories and regions, including China, had improved, discounting the impact of war.
Shares in the conglomerate, which is run and controlled by billionaire Bernard Arnault, have dropped by 26% since the start of the year, making it one of Europe's worst large-cap performers.
Fashion and Leather Down Again
FASHION AND LEATHER DOWN AGAIN
Performance of Core Divisions
Sales at LVMH's core leather and fashion division, which last year accounted for roughly 80% of operating profits, were down by 2% organically, below analyst estimates of a 1% decline.
It was the seventh straight quarter of declining revenues at the division.
Flagship Brands: Louis Vuitton and Dior
The individual performance of flagship brands Louis Vuitton and Dior, which is undergoing a makeover under new designer Jonathan Anderson, was in line with the division as a whole, the company said.
U.S. Market Remains Resilient
Demand in the United States was the main bright spot. U.S. sales showed 3% organic growth, the company said, adding the war so far has not disrupted the spending mood there.
U.S. luxury spending constantly rose during the first quarter, according to credit card data cited by Citi analysts, with people spending more on individual purchases.
Consumer Sentiment in the United States
Consumer sentiment in the United States, however, hit a record low in early April and consumers anticipate a surge in inflation in the next 12 months, according to a leading survey published on Friday.
(reporting by Tassilo Hummel and Dominique Patton, additional reporting by Noel Randewich; editing by Barbara Lewis)
