Hermes hit as war deters shoppers from Dubai to Paris
French luxury group Hermes reported weaker-than-expected first-quarter sales as the Iran war hit spending in the Middle East and Europe and fewer tourists visited Paris or London and bought designer goods.
Investors’ hopes that luxury demand would recover have been dashed by the conflict, which has hurt Dubai mall sales and sent energy prices soaring, hitting consumer confidence.
By carefully controlling production and sales to maintain exclusivity, Hermes proved to be the most resilient company in the face of the industry-wide slowdown, but even it was not immune to the impact of the conflict.
LVMH and Kering reported this week that sales were negatively affected by the war.
Hermes said overall sales of products including Birkin and Kelly bags, silk scarves and perfume rose 5.6 percent in currency-adjusted terms, lower than the 7.1 percent growth forecast by Visible Alpha analysts.
Sales in the Middle East region fell six per cent to 160 million euros ($A264 million) on an exchange-adjusted basis, from 185 million euros in the first quarter of 2025.
“We had very good growth, double-digit growth, in January and February, and then March suddenly stopped,” Chief Financial Officer Eric du Halgouet said, adding that sales at luxury malls in Dubai and other malls in the Gulf fell 40 percent in March.
The Middle East is the fastest-growing region for Hermes in 2025, despite accounting for only 4.4 percent of sales.
Hermes, which caters to the ultra-rich with bags worth more than US$10,000 ($14,000), said the drop in tourist numbers had affected sales at airports and concession stores in the Middle East, as well as sales in the UK, Italy and Switzerland, where Gulf customers are a key driver.
In France, sales decreased by 2.8 percent due to the decline in tourism.
Du Halgouet said that in Asia, Hermes’ biggest region by sales, revenue rose only 3.5 percent on a currency-adjusted basis as disruption to air travel also had an impact there, particularly in Singapore and Thailand.
The U.S. was a bright spot, with currency-adjusted sales rising 17.2 percent.
Currency fluctuations caused Hermes to lose 290 million euros in revenue in the quarter, leading to a 1 percent drop in reported sales to 4.07 billion euros from 4.13 billion euros a year ago.
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