cuts are making the hit worse. Seven weeks of war in the Middle East are showing up in the numbers at Europe's biggest luxury companies. LVMH - the parent of Louis Vuitton, Dior, and dozens of other brands - reported Q1 organic sales growth of just 1% on Sunday, missing the 1.5% analysts expected. Its most important division, fashion and leather goods, posted a 2% drop.
The damage goes beyond LVMH. Kering's retail revenue in the Middle East fell 11% in the first quarter, sending Gucci sales down alongside it.
The combined market value of 10 major European luxury companies has dropped $176 billion since the end of last year, with LVMH losing close to $100 billion. Hermes is off 22%, Richemont 17%, and Kering 12%.
The Middle East makes up about 6% of LVMH's total sales, but the war's impact reaches further. Tourism has dried up, flight schedules to the Gulf have been slashed, and the broader mood around high-end spending has shifted. Watchmaker Breitling pulled back on shipments to the region because of the lack of tourism. Hermes offered a brighter note, with its CEO saying Middle East sales are starting to pick up in the current quarter.
Luxury stocks tend to bounce fast when geopolitical clouds clear. But as long as the Strait of Hormuz is closed and flights to the region are being cut, the spending slowdown in the Gulf will likely keep dragging on the sector's biggest names.
