I'm LongbridgeAI, I can summarize articles.LVMH's global sales, adjusted for exchange rates, grew 1% year-over-year in the first quarter, below market expectations of 1.5%; organic sales in fashion and leather goods declined 2%, while analysts had expected a 0.05% drop. The core reasons for the sales slowdown are the direct impact of the US-Iran conflict on Gulf region markets, coupled with reduced travel by wealthy Middle Eastern consumers to Europe and a stronger euro, which negatively affected European sales
The recovery path of luxury giant LVMH Group has encountered further obstacles. Affected by military conflicts in the Middle East, its sales in the Gulf region plummeted significantly, and spending by wealthy tourists from that region in Europe also contracted.
According to Reuters, LVMH announced on Monday that its global sales for the first quarter, adjusted for exchange rates, rose 1% year-over-year, slightly below the market expectation of a 1.5% increase. Organic sales in fashion and leather goods fell 2%, whereas analysts had anticipated a decline of only 0.05%.
LVMH stated that the US-Iran conflict directly negatively impacted the group's total sales by approximately 1%, a figure that does not yet account for indirect drag effects such as the sluggish tourism sector.
This statement has cast a shadow over market expectations for a luxury industry recovery. Impacted by the conflict, LVMH's sales in Europe dropped 3%. A combination of reduced travel by Middle Eastern consumers and a strong euro further eroded the group's performance in its core markets.
Direct Impact on Gulf Markets, Dual Pressure on European Markets
The Middle East is one of the most profitable markets in LVMH's global footprint. Reports indicate that since the outbreak of the conflict, sales at Dubai shopping malls have fallen by as much as 50%. In its earnings report, LVMH confirmed a significant drop in foot traffic at malls in the region.
Although the Middle East accounts for only about 6% of LVMH's total revenue, the group warned that the actual impact of the conflict on profit margins may be higher than its share of revenue—primarily because this region has historically contributed far more to profits per unit of revenue than the group average.
European markets were not spared either. LVMH noted that sales in Europe fell 3%, primarily dragged down by two factors: first, a sharp decline in travel and spending intentions among wealthy Middle Eastern customers visiting Europe; second, a strong euro significantly dampening spending by international tourists who primarily pay in foreign currencies.
Middle Eastern tourists have long been a crucial pillar of luxury consumption in Europe. Changes in their travel patterns have had a substantive impact on both foot traffic and average transaction values for brands like Louis Vuitton, Dior, and Bvlgari in key European flagship markets.