Dubai has stopped being a goldmine: luxury sales fell 30–50%

Sales at Europe’s biggest luxury brands have shrunk in Dubai and Abu Dhabi as the Iran conflict hit the sector’s fastest-growing market — the latest setback for a $400 billion industry whose value has contracted over the last three years.

In March, luxury brands reported sales drops of 30–50% at the Mall of the Emirates, one of Dubai’s largest, compared with the same month last year. Footfall at the mall — home to boutiques spanning LVMH’s Louis Vuitton and Dior, Kering’s Gucci, Richemont’s Cartier, Chanel and Rolex, alongside an indoor ski resort and a wellness clinic — dropped 15% in March. Traffic at the larger, more tourist-oriented Dubai Mall was down around 50%, indicating a potentially even larger sales drop. In Abu Dhabi, less reliant on tourist spending, March sales at the Galleria mall were more resilient but still down around 10%.

None of the companies operating the Mall of the Emirates, Dubai Mall and Galleria replied to requests for comment. LVMH, Kering and Hermès also did not respond to questions about Middle East sales.

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

The Middle East, accounting for roughly 5% of global luxury consumption, had been one of the industry’s rare bright spots, reporting double-digit annual revenue growth in recent years, said Carole Madjo, head of luxury research at Barclays. “It was definitely a strategic region. Everything was okay.”

Dubai’s carefully curated image of glamour and stability has been shaken by the conflict that began with US and Israeli strikes on Iran on February 28. The city’s major airport hub has been targeted multiple times by Iranian drone attacks along with other infrastructure, while the landmark Burj Al Arab hotel suffered damage when debris from an interception hit its facade. Getting back to normal will take months, even if diplomacy succeeds soon.

Bernstein analysts warned that the conflict’s ripple effects — higher oil and travel costs, inflation, a possible stock market rout — could “easily disrupt” shopper appetite beyond the Gulf too, particularly in the United States. “If it now turns out that whatever luxury recovery we were hoping for in 2026 is not going to happen, and it’s going to be postponed at best into the second half or into next year, I don’t think anybody can be surprised by it,” said Christopher Rossbach, portfolio manager at J Stern & Co.

Because of the region’s relatively small size, the immediate hit to quarterly sales will be limited. But the effect on profits, which most listed luxury groups report only half-yearly, could be far more significant, Rossbach said. The reason is simple: with low rents and labour costs, higher retail prices than other regions and virtually no taxes, Dubai is one of luxury’s most lucrative sales spots. For megabrands like Louis Vuitton, Hermès or Chanel, annual sales per square metre there can surpass several hundred thousand euros — multiples of the global average.