War in Syria Hits Luxury Market

While the Middle East represents approximately 4.4 percent of Hermès' total sales, customers in the region account for about 7 percent of the total, explained Du Halgouet. Gucci sales plummet. Earlier this week, the main fashion and leather goods units of LVMH Moët Hennessy Louis Vuitton SE saw a 2 percent drop in sales. Gucci sales also plummeted, and Kering's retail revenue in the Middle East fell 11 percent in the first quarter. Hermès shares fell as investors sold their stakes after results they found particularly disappointing in France and Asia, as well as in the Middle East. The combined market capitalization of 10 listed European luxury companies has fallen by $176 billion since the end of last year, according to data compiled by Bloomberg. LVMH has lost nearly $100 billion of its value as its shares continued to fall following the luxury giant's worst-ever first-quarter performance. The war in the Middle East has disrupted oil and gas supplies and clouded economic prospects, fueling fears of a global inflationary crisis. The longer the conflict drags on, the greater its repercussions, and instability is already dampening hopes for a luxury sector recovery after new designers joined brands like Dior and Gucci. LVMH's business in the Middle East, which accounts for about 6 percent of total sales, was hit after a 'very positive start to the year,' the company's chief financial officer, Cécile Cabanis, said on Monday. Seven weeks of war in the Middle East are stifling demand in the luxury industry, and LVMH, Kering, and Hermès have all reported lower sales in the first quarter. Middle Eastern buyers are among the biggest spenders in the world, splurging in shopping malls like Dubai and other luxury destinations like Paris and Milan. The disappointing results of three of the biggest groups reveal how the impact of canceled flights and disrupted vacations is spreading across the sector. Hermès International, usually the sector's best-performing company, disappointed with a 5.9 percent drop in sales in the region. Hermès, one of the most war-affected luxury brands in Iran. Hermès lost nearly $20 billion of its value just this Wednesday, as its shares fell as much as 14 percent. 'We had excellent growth, with double-digit rates, in January and February, but in March it completely stopped' in the Middle East, Hermès CFO Eric du Halgouet told reporters on a conference call Wednesday. Hermès has six stores in the region, three of which it operates directly. In France, where more than half of Hermès' business is tied to tourism, sales fell 2.8% due to less spending by visitors, according to du Halgouet. The Birkin bag maker's stores in Switzerland and the UK were also hit by fewer Middle Eastern customers. The war reduced the group's organic growth by about one percentage point during the quarter.