Mall traffic in the Middle East halved — and it cost LVMH a point of sales

Shares in LVMH fell as much as 3% after first-quarter sales were hit as the war in Iran dented spending by Middle Eastern shoppers, further delaying a long-awaited recovery for the luxury sector leader.

The group, which owns 75 brands including Louis Vuitton, Dior and Tiffany & Co, said the conflict shaved at least one percentage point off global sales due to weaker spending in Gulf shopping hubs such as Dubai. Its shares are down 27% since the start of the year as hopes for a rebound faded, with disruption and inflation from the war creating a new obstacle to growth.

LVMH finance chief Cécile Cabanis said mall traffic in the Middle East, which accounts for about 6% of group turnover, initially dropped by between 30% and 70%, averaging about 50%. “What we see today is still that demand is very much down,” she said. LVMH only reports profit at half-year results in July, but Cabanis flagged a likely bigger hit to profitability, calling the Middle East “quite a profitable market.” The conflict also hurt European sales, down 3%.

“It remains clear that 2026 is still a transition year for LVMH,” said Ben Lambert, European equities portfolio manager at Ninety One. “For the shares though that is already reflected in the valuation.”

Kevin Thozet, portfolio adviser at Carmignac in Paris, said higher energy prices and mortgage rates are likely to curb demand from middle-class “aspirational” luxury consumers, while weaker stock markets could also hit spending by wealthy Americans. “The question is whether we are just kicking the can down the road because of what’s happening in the Middle East, postponing expectations of a recovery by one or two quarters, or if it’s something more material.”

Berenberg analyst Nick Anderson put it more bluntly: “LVMH is one of the best-managed groups in the sector, I think, and if they’re doing all the right things and they’re struggling to move the dial, then it speaks to the broader malaise in the sector.” He added that a stronger euro against the dollar hit first-quarter sales and could weigh further on demand as fewer tourists visit Europe. “This will still be a big issue in the second quarter.”

Investors now look to the war’s impact on other brands: Kering reports after the market close, and Hermès gives first-quarter results on Wednesday morning. Both are estimated to be slightly less reliant on the Middle East than LVMH.