By Helen Reid
April 14 (Reuters) – Shares in French luxury goods group LVMH fell as much as 3% on Tuesday 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.
LVMH, which owns 75 brands including Louis Vuitton, Dior, and Tiffany & Co, said on Monday the conflict shaved at least 1 percentage point off global sales due to weaker spending in Gulf shopping hubs such as Dubai.
LVMH shares are down 27% since the start of the year as hopes for a rebound in luxury demand have faded, with disruption and inflation caused by the war creating a new obstacle to growth.
“It remains clear that 2026 is still a transition year for LVMH,” said Ben Lambert, European equities portfolio manager at Ninety One in London. “For the shares though that is already reflected in the valuation.”
‘BROADER MALAISE’
Higher energy prices and mortgage rates are likely to curb demand from middle-class, or “aspirational”, luxury consumers, said Kevin Thozet, portfolio adviser at Carmignac in Paris, while weaker stock markets could also impact 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,” said Thozet.
LVMH’s finance chief Cecile Cabanis said mall traffic in the Middle East, which accounts for about 6% of group turnover, initially dropped by between 30% and 70%, with an average drop of about 50%. “What we see today is still that demand is very much down,” she said.
While LVMH only reports profit figures at half-year results in July, Cabanis flagged a likely bigger hit on profitability from the war, saying the Middle East is “quite a profitable market”. The conflict also hurt LVMH’s sales in Europe which fell 3%.
Investors will watch for the war’s impact on other luxury brands when Gucci owner Kering reports after the market close, and Hermes gives its first-quarter results Wednesday morning. Both are estimated to be slightly less reliant on the Middle East than LVMH.
“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,” said Berenberg analyst Nick Anderson.
A stronger euro against the dollar impacted LVMH’s first-quarter sales and could also weigh on luxury demand as fewer tourists visit Europe and buy handbags or perfumes, Anderson said. “This will still be a big issue in the second quarter,” he added.
($1 = 0.8501 euros)
(Reporting by Helen Reid in London and Mateusz Rabiega in Gdansk. Editing by Danilo Masoni and Mark Potter)
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