Luxury conglomerate and industry bellwether LVMH reported quarterly sales that missed expectations on Monday.
Organic sales grew 1% in the first quarter, but analysts surveyed by FactSet had expected 1.5% growth in the March quarter.
The Middle East conflict had a 1% negative impact on organic growth in the quarter, LVMH said in a statement.
“LVMH maintained its powerful innovative momentum and showed good resilience in a geopolitical and economic environment that remained disrupted, amplified by the conflict in the Middle East,” the company said, also flagging a good start to the year in the US.
US-listed shares of the French company fell 3.4% on Monday.
Analysts broadly expect growth to pick up significantly in the next quarters as LVMH and others continue to try to reinvent themselves and win back customers.
Many shoppers turned their back on brands following a luxury boom that ended in 2022, which saw significant price hikes and strategic decisions that alienated parts of their clientele.
Fashion division drags performance
LVMH’s fashion and leather goods division — its biggest unit, home to Louis Vuitton, Dior and Fendi — declined 2% to €9.2 billion ($10.8 billion) in constant currencies in the quarter.
Total revenue came in at €19.1 billion, slightly below expectations.
On a reported basis, LVMH sales declined 6% in the quarter, impacted by unfavourable exchange rates.
Watches and jewellery grew 7% in the quarter on an organic basis, driven by a strong performance from Tiffany.
The group’s wine and spirits division grew 5% in the quarter.
It comes as the sector has shown some signs of a long-awaited recovery after a years-long slump prompted by soft demand from Chinese consumers, formerly one of the sector’s main growth drivers.
Asia excluding Japan saw strong growth, “confirming the improvement in trends observed starting in the second half of 2025,” the company added.
Local demand helped to partly offset lower tourist spending.
Geopolitical tensions weigh on sentiment
Luxury stocks have fallen since the Iran war broke out in late February.
While the Middle East accounts for a relatively low percentage of total sales for most big luxury companies — typically around mid-single digits — stocks have fallen markedly since the US and Israel first struck Iran on Feb. 28.
Global markets remain volatile as an energy crisis unfolds with the effective closure of the Strait of Hormuz.
“Elevated global uncertainty has generated significant investor anxiety, particularly among those who had been anticipating a long-awaited recovery in luxury demand this year,” said UBS analyst Zuzanna Pusz in late March.
Consumer sectors typically underperform during periods of oil and energy-related shocks, and heightened geopolitical uncertainty is likely to weigh on sentiment in the near term, Pusz said.
Even so, there are still no signs of a demand slowdown, especially in Asia.
“Against a backdrop of very negative market sentiment and depressed valuations, we think that even modest Q1 beats could be disproportionately rewarded,” she added.
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