Impact of the Middle East War on Luxury Sales
Shares in Hermes experienced a significant decline this morning, following reports of falling sales attributed to the ongoing conflict in the Middle East. The war has led to a noticeable drop in tourist numbers visiting key shopping destinations, which has directly affected luxury brands like Hermes.
Hermes, known for its iconic Birkin Bag, is among the latest luxury groups to face challenges due to the war. Wealthy tourists have been hesitant to spend in the conflict-affected region and across Europe. Despite a 5.6 per cent increase in sales for the French company during the first three months of the year, this fell short of analyst expectations of a 7.5 per cent rise.
Sales in the Middle East region dropped by 6 per cent, with footfall to major shopping hubs declining sharply since the outbreak of the war. The impact was particularly felt in the United Arab Emirates, as well as in Kuwait, Qatar, and Bahrain.
This decline in sales has caused shares in Hermes to fall by 12.9 per cent this morning. 
France, a major destination for tourist shopping, also faced similar challenges, with sales declining by 2.8 per cent as wealthy consumers chose to stay away. Shops in Italy, Switzerland, and the UK have also seen fewer Middle Eastern shoppers, according to the chief financial officer, Eric du Halgouet.
The situation reflects broader concerns within the luxury market, as highlighted by LVMH this week. The group, which owns brands such as Moet, Givenchy, and Louis Vuitton, presented a gloomy outlook for the long-awaited recovery in luxury sales. LVMH reported that the conflict reduced sales growth by approximately 1 per cent in the first quarter of the year.
Emma Wall, chief investment strategist at Hargreaves Lansdown, commented: ‘Luxury good companies LVMH and Hermes have announced results this week, revealing the stark impact of the Iran war on sales. Share prices for the sector have fallen on the news.’
While Hermes Birkin handbags, which start at £12,000 each, may not be considered essential for most people, luxury goods sales are often a leading indicator of economic growth. Market analysts are closely watching these developments.
Despite the downturn in the luxury market, Hermes reported that its bags continued to drive sales. Sales in this division increased by 9 per cent in the first quarter of the year.
Executive chairman Axel Dumas stated: ‘In a tense geopolitical environment, Hermès maintains its course, true to its long-term strategy. Supported by its abundant creativity, its uncompromising quality and the loyalty of its clients, Hermès is continuing its profitable growth in 2026 with confidence and conviction. The fundamentals of the Hermès model are more than ever a differentiating strength.’
