LVMH, the owner of luxury labels including Louis Vuitton, Dior, Bulgari and Hennessy, recorded a small currency-adjusted increase in quarterly sales but flagged a clear hit from recent Middle Eastern hostilities.
On a currency-neutral basis, the group's sales rose by 1%, slightly under the Visible Alpha consensus of a 1.5% gain. Management attributed roughly a 1% negative effect on total group sales to the military conflict involving Iran and Israeli-U.S. forces - a figure reported before taking account of secondary consequences such as reduced tourism in other markets.
The impact was concentrated in the Gulf, where LVMH said mall traffic had fallen sharply and mall sales in Dubai had dropped by as much as 50% since the conflict began. While the Gulf region represents about 6% of LVMH's turnover, the company cautioned that the hit to profit margins is likely to exceed the sales decline because those markets deliver exceptional profitability for the group.
European sales were also affected, with the company reporting a 3% decline in the region. LVMH cited the war and a strong euro as the main drivers of that weakness, noting that reduced spending by affluent tourists from the Gulf contributed to softer demand across European retail locations.
The company’s statement separated the direct sales loss attributed to the conflict from wider indirect effects, signalling that the immediate 1% sales drag may understate the total economic consequences if tourist flows and mall traffic remain depressed. LVMH emphasized the regional concentration of the shock and its disproportionate effect on margins given the high profitability of those markets.
Overall, LVMH’s reported currency-adjusted growth was modest and slightly below analyst expectations, while management highlighted the unique profitability of the affected Gulf markets as a channel through which the conflict could exert an outsized influence on group earnings.
Summary
LVMH posted a 1% currency-adjusted sales gain for the quarter, slightly below consensus, and said the Iran conflict reduced group sales by around 1%, with larger margin risk because the Gulf accounts for a small but highly profitable share of turnover. Mall traffic and tourist spending fell sharply in the region and European sales declined 3% amid the war and a strong euro.