Europe’s luxury goods giants reported their worst quarterly results in years in mid-April. LVMH, Kering and Hermes all cited the ongoing conflict in the Middle East as a significant drag on first-quarter results as investors brace for a sector recovery that has now failed to materialize for three consecutive years.
LVMH, the world’s largest luxury group by revenue, reported a 6% decline in first-quarter sales to €19.1 billion on a reported basis, with the dispute taking a direct hit to all of the group’s organic growth. LVMH CFO Cecile Cabanis said demand had fallen between 30 and 70 per cent across the group’s Middle East operations when hostilities began and during the month of March, depending on location and type of business. LVMH shares had their worst quarterly start on record during this period.
Kering’s situation worsened. The Paris-listed group reported first-quarter sales of 3.57 billion euros, down 6% year-on-year on a reported basis and flat on a currency-adjusted basis, but it was the performance of flagship brand Gucci that surprised analysts. Gucci’s organic sales fell 8% year-on-year, a steeper decline than the 6% decline expected, and sales fell 14.3% to €1.35 billion. Retail sales across Kering’s 79 stores in the Middle East fell 11% during the quarter. Kering shares closed 9.3% lower on the day of the results and remained down about 7% for 2026 as a whole.
Hermes, a traditional performer in the sector, reported year-on-year sales growth and maintained its relative advantage over its peers, but said its activities were significantly affected by developments in the Middle East and its shares still fell 8.2%. This is a measure of how much the market values continued immunity from pressures on the rest of the sector.
On this day, the luxury goods index pulled down three reporting groups, including Burberry, Christian Dior, and Moncler.
The results capped what was supposed to be a year of recovery. We enter 2026 with new creative directors creating product momentum across houses, with Chanel launching a new popular handbag under the leadership of Matthieu Blazy and Gucci’s new creative head debuting its initial collections. Wealthy consumers in the United States spent freely through January as the domestic stock market rose, and China’s tentative recovery that began in late 2025 appeared to be maintaining.
The outbreak of conflict involving Iran has derailed this situation, sending energy prices sharply higher, weighing on stock markets and reducing tourist flows through the Gulf region, which accounts for about 5% of global luxury goods sales, according to HSBC analysts. HSBC has since lowered its sector growth forecast for 2026 from 7% to 5.9%, but analysts also acknowledge the revised figure could be optimistic depending on how the geopolitical situation develops.
Since the end of the luxury boom following the pandemic in 2022, the combined market capitalization of LVMH and Kering has fallen by more than €100 billion. LVMH stock currently trades at about 20 times forward earnings, below its five-year average of about 24 times, while Hermes trades at 36 times forward earnings, well below its five-year average of about 48 times.
Kering’s Capital Markets Day followed its first quarter results and new CEO Luca de Meo was expected to present the group’s strategic roadmap, titled ReconKering, with investors closely watching for evidence that Gucci’s structural decline could be reversed in its current direction.
