Luxury stocks fell after weak Hermès reporting amid war in the Middle East

Shares of luxury companies fell sharply in early trading on Wednesday, April 15, after Hermès, and the day before - the owner of Gucci, Kering, reported for the first quarter worse than investors' expectations. Sales of luxury goods are under pressure from the conflict in the Middle East, writes CNBC. Analysts warn that the recovery of the sector may take longer and be weaker than market expectations.

Hermès papers collapsed at trading in Paris by more than 10%, and at the moment they fell by 14% - the largest intraday decline in the history of the company, notes Bloomberg. Since the beginning of the year, the securities have fallen in price by about 30%.

Kering shares fell 10% in Paris and more than 16% since the beginning of the year. Weak reports of Hermès, Kering and LVMH pulled down the entire luxury sector: shares of Burberry, Christian Dior and Moncler were among the worst in the all-European index Stoxx 600, having lost 1.5-2.5% each.

- As Hermès noted in its report for the first three months of 2026, despite a slowdown in tourist traffic amid the situation in the Middle East, sales in the group's stores during this period grew 7% year-on-year. The company's quarterly revenue amounted to €4.1 billion ($4.8 billion), up 5.6% compared to the same period last year (analysts expected growth of 7.44%, Bloomberg writes).

Hermès sales in the region, which includes the Middle East, were down 5.9% year-on-year, while revenue in France, a key tourist destination, fell 2.8% amid weakening tourist spending. However, the company noted that the wholesale segment was significantly impacted by a decline in sales at concession stores, particularly in airports and the Middle East. The share of this region in Hermès' total revenue is about 4%.

At the same time, the group's growth was supported by other regions: revenue in the Americas increased by 17% and in Europe excluding France by almost 10%.

- Kering on April 14 reported revenue below expectations as the group's biggest brand, Gucci, continued to drag results down despite efforts by new CEO Luca de Meo to improve performance. Gucci's comparable sales fell 8% year-on-year in the first quarter, Kering said. This is the 11th consecutive quarter in which the brand's sales have fallen, Reuters noted. Analysts had expected a 4.3% decline in Gucci sales, Bloomberg wrote.

The war in the Middle East had a negative impact of about 1 percentage point on Kering's total sales. The company's revenue fell 6% year-on-year in the first quarter to €3.57 billion. Gucci owner's retail revenue in the Middle East fell 11% year-on-year in the same period, despite growth in January-February. Kering has 79 stores in the region, which account for about 5% of the group's total retail revenue.

- LVMH also said earlier this week that the conflict in the Middle East has had a negative impact on its sales. Cecile Cabanis, the company's chief financial officer, said revenue at the group's key division, which includes the Louis Vuitton and Christian Dior Couture brands, would have been close to flat rather than negative without the impact of the conflict. In the first quarter, revenue from this LVMH division totaled €9.25 billion and organic sales were down 2%, while for the group as a whole, revenue reached €19.1 billion, showing a 1% year-on-year increase.

Bernstein analyst Luca Solka called the results of companies from the luxury sector "a reality check". According to him, the market tends to believe in the recovery of companies faster than management has time to make real improvements, CNBC reports.

Citigroup analysts noted that the timing of Gucci's recovery remains uncertain and is likely to be stretched amid a challenging macroeconomic environment and ongoing geopolitical tensions. Their opinion is quoted by Reuters.

JPMorgan analysts paid attention to the fact that Kering reported a strong demand for Gucci products in North America - such a trend, according to experts, is typical for the entire sector, not just for one brand. At the same time in other regions, JPMorgan noted, the luxury sector recorded a double-digit drop in sales in the first quarter. According to analysts, this indicates that the recovery of business in the luxury sector will take more time and require much more effort than optimistic investors expect, writes Reuters.

Of the 24 analysts covering Kering stock, the majority - 15 - advise holding the stock in a portfolio. Five recommend buying the securities and four recommend selling.

The consensus on Hermès shares is more positive. Out of 22 analysts 14 recommend to buy securities, seven - to hold and only one - to sell.

The consensus on LVMH shares also remains predominantly positive. Out of 27 analysts 15 recommend to buy securities. 11 experts advise to hold and only one advises to sell.

This article was AI-translated and verified by a human editor