The Middle East war is weighing on luxury at both ends, hurting demand in the region and the European shopping trips Gulf clients rely on, as shares in the sector’s biggest names fell sharply this week.
Luxury groups’ direct exposure to the region is modest. Earlier coverage put the Middle East at about 5% of Kering’s retail revenue and 4.3% of Hermès’s. The reach is wider than those figures suggest. Middle East clients who travel to the UK, Italy, Switzerland and France account for a large share of the group’s sales there. Kering activated a crisis unit for its 79 regional stores and 1,100 employees after its Retail revenue in the region declined by 11% in the first quarter.
The conflict itself is still escalating. Iran warned the US military is not allowed in the Gulf “under any circumstances,” while Houthi missiles targeted Riyadh and tankers hit mines near Hormuz. Air India has suspended flights to Riyadh and Dammam until Nov 7.
Market reaction
Shares in Gucci owner Kering plunged 16% in Paris on Oct 23 after third-quarter results showed Gucci sales down 6%. The group said it had closed 105 stores and would shut 20 more by year-end. Hermès fell 4% to a four-year low, and Berenberg cut it to Hold. Kering, LVMH and Hermès are each down about 40% this year, according to Korean press reports citing Reuters and Bloomberg. Those reports blame weak Chinese demand and European unrest as well as the Middle East war’s pressure on oil prices and inflation.
What it may mean for the Gulf
For Gulf luxury retailers and the agencies serving them, the likely effects are tighter marketing budgets and a greater focus on resident clients over tourists. That is an inference from the reporting, not something the companies have said.
