LVMH Q1 2026: Recovery Deferred
LVMH, the world's largest luxury conglomerate by revenue, missed first-quarter sales expectations as the Iran war curbed demand and interrupted what had appeared to be the early stages of a sector recovery.
The group's fashion and leather goods division, home to Louis Vuitton and Christian Dior, reported a 2% revenue decline in the quarter. The division is LVMH's largest and most profitable, making its underperformance the most significant driver of the overall shortfall.
LVMH CFO Cécile Cabanis said the Middle East conflict had a 1% negative impact on organic growth in the quarter. "When the conflict started, and in the month of March, there was a shortfall and a deterioration of demand between 30% and 70%, depending on the malls, depending on the businesses," she said. Analysts nonetheless noted underlying improvements, including strong spending by customers in the U.S. And China.
The results were not confined to LVMH. Hermes reported first-quarter sales of 4.1 billion euros, up 5.6% year-on-year, but fell short of analyst expectations of 7.1% growth. The company said wholesale activity was "significantly affected" by lower sales to concession stores, particularly in the Middle East and at airports. Results in France, where more than 50% of sales are linked to travellers, were also hit. Hermes shares fell 14% on the day.
Kering reported first-quarter revenue of 3.57 billion euros, down 6% year-on-year on a reported basis. Its flagship brand Gucci posted an 8% organic sales decline, worse than the 6% drop analysts had forecast. Kering said retail revenue in the Middle East fell 11% in the first quarter, following growth in the first two months of the year. With 79 stores in the region, the Middle East represents around 5% of Kering's retail revenue. Kering shares fell 10%.
Burberry, Christian Dior, and Moncler were also among the worst performers in the pan-European Stoxx 600 on the day, each falling between 2% and 3%.
While the Middle East region typically accounts for a mid-single-digit share of big luxury companies' revenues, it had been a rare bright spot in an otherwise sluggish sector. Stocks across the sector have fallen markedly since the U.S. And Israel first struck Iran on 28 February, compounded by broader market volatility stemming from an energy crisis and the effective closure of the Strait of Hormuz.
"Elevated global uncertainty has generated significant investor anxiety, particularly among those who had been anticipating a long-awaited recovery in luxury demand this year," said UBS analyst Zuzanna Pusz.
Jefferies analyst James Grzinic said Hermes shares' decline reflected two fears: a heavily challenged Middle East exposure and concerns around slowing Chinese momentum. Bernstein analyst Luca Solca described Kering's results as a "reality check," noting that "it is easier and faster for the market to believe in a revival, than it is for management to produce it."
The results arrive at a fragile moment for the sector. The luxury industry had shown tentative signs of recovery following a prolonged slump driven by weak demand from Chinese consumers, whose spending on high-end goods contracted sharply in recent years. The breadth of misses across the sector signals that any sustained rebound remains conditional on geopolitical stabilisation that is not yet in sight.
Chief executive Bernard Arnault has navigated previous demand cycles by leaning on price increases and brand exclusivity, but the combination of an unresolved regional conflict and a still-cautious Chinese consumer limits the levers available in the near term.
