LVMH's fashion and leather goods business segment saw an organic decline of 2% in the first quarter of 2026, largely attributed to the ongoing conflict in the Middle East. This regional instability had a broader negative impact, contributing to a 1% drag on LVMH's overall organic growth for the quarter. The company's CFO, Jean-Jacques Cabanis, noted a substantial deterioration in foot traffic at stores in the Middle East, a market that typically accounts for 6% of LVMH’s turnover and is considered quite profitable. Initial declines ranged from 30% to 70%, with an average fall of 50%. This downturn in physical retail was significantly worse than the more resilient digital traffic, where web visits to LVMH fashion brands in the UAE declined by 7.1% year-over-year in March.
The Middle East conflict has led to a significant drop in LVMH's shares, with a 28% decrease in the first quarter of 2026, marking the worst start to a year in the company's stock market history. This decline surpasses the impact of previous crises like the dot-com bubble and the 2008 financial crisis. Bernard Arnault, LVMH's chairman, saw his fortune decrease by $55.4 billion, bringing it to approximately $152.5 billion, the largest loss among the 500 richest individuals globally in that period. Analysts, including Danni Hewson from AJ Bell, suggest that while direct impacts from reduced wealthy shoppers in places like Dubai might be moderate, the larger concern is the potential hit to overall consumer confidence due to inflation fears and global upheaval.
The impact was not isolated to the Middle East; the conflict also affected sales in Europe, causing a 3% decline. Digital traffic in Europe also suffered, with a 19% drop in the UK, 32% in Italy, and 27% in Germany for March. In contrast, while the UAE experienced a 2.1% decline in web traffic and Qatar a 13.2% fall, Saudi Arabia showed resilience, with a 22.8% growth in digital traffic, making it the only Gulf market to maintain its seasonal boost. Despite stronger digital performance compared to physical retail, LVMH's e-commerce setup is providing some protection against the larger declines seen in traditional stores. If consumer sentiment remains weak and inflation fears persist, the anticipated recovery for luxury brands like LVMH could be further delayed.
