French luxury group Hermès saw its first-quarter sales growth fall short of expectations, with conflict in the Middle East significantly dragging down customer traffic and spending—a challenge that has become common across the luxury sector. European luxury stocks tumbled accordingly, with Hermès falling over 10% and Louis Vuitton dropping more than 8%.
Hermès released its first-quarter earnings report on Wednesday, reporting total revenue of €4.07 billion for the first quarter of 2026. At constant currency, sales grew 5.6% year-over-year, below analysts' expectations of 7.44%.
By region, Asian markets saw sales grow 3.5%, Americas up 17.2%, and Europe overall rose 4.5%. Other regions, including the Middle East, declined by 5.9%. Additionally, the French market, a key tourism destination, saw sales drop 2.8%.
This weakness is not unique to Hermès. Fellow luxury giant LVMH stated earlier this week that Middle East conflict had impacted its performance; Gucci, the flagship brand of Kering Group, also posted sales data below expectations, partly attributed to the situation in the Middle East. The absence of Middle Eastern consumers has become a shared variable affecting the performance of the entire European luxury industry.
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<h2>Middle East Conflict Severely Impacts Customer Traffic, European Stores Hit First</h2>
Eric du Halgouet, Hermès Chief Financial Officer, stated during a conference call with journalists that the company's stores in Italy, Switzerland, and the UK were all significantly affected by the decline in Middle Eastern shoppers. Sales in the French market fell 2.8% during the same period, with March being particularly notable as tourism-driven consumption weakened markedly.
This mirrors the experience of LVMH closely. According to Bloomberg, Cécile Cabanis, LVMH's CFO, noted that absent the disruption from Middle East conflict, its core divisions—covering Louis Vuitton and Christian Dior Couture—could have achieved &#34;flat&#34; revenue rather than negative growth.
Apart from Middle East factors, performance in the Asia-Pacific region (excluding Japan) also disappointed the market. The region recorded only a 2.2% increase in sales at constant currency for the first quarter, less than half of the 5.84% expected by analysts, indicating limited recovery strength in this market. The simultaneous weakening of these two key regions was the primary reason Hermès failed to meet its overall sales growth targets.
<h2>Expansion Against the Tide Shows Determination, Scarcity Model Struggles Against Industry Downturn</h2>
Despite external pressures, Hermès has not slowed its strategic investment pace. Last week, the company officially inaugurated its 25th leather goods manufacturing plant, demonstrating its commitment to continue expanding capacity amid geopolitical instability.
Hermès' business model, centered on &#34;controlling scarcity,&#34; has historically shown strong resilience during industry downturns. Although it could not fully insulate itself this time, it still demonstrated greater resistance to decline compared to peers. However, this also reflects that the entire luxury industry has entered a cycle of overall pressure.

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LVMUY

Hermès reported a 5.6% increase in first-quarter sales at constant currency, falling short of the expected 7.44%, primarily due to reduced foot traffic and consumption driven by conflicts in the Middle East. Sales in regions covering the Middle East market declined by 5.9%, while the French market dropped by 2.8%, and growth in the Asia-Pacific region also missed expectations. Competitors such as LVMH and Kering faced similar shocks, indicating a widespread industry challenge

- Hermès reported a 5.6% year-over-year revenue growth for Q1 2026, falling short of analyst expectations of 7.44%, with total revenue at €4.07 billion.  
- The ongoing conflict in the Middle East significantly impacted customer flows, particularly in Europe, leading to a decline in sales across the luxury sector, with Hermès shares dropping over 10%.  
- Despite these challenges, Hermès continues to expand production capacity, demonstrating resilience while the overall luxury goods market faces pressure from declining consumer demand.

Under Middle East War Shock, Hermès Q1 Sales Growth Misses Expectations, Stock Plunges Over 10%