LVMH sales miss expectations as luxury recovery is put on pause amid Middle East war

Luxury conglomerate and industry bellwether LVMH reported quarterly sales that missed expectations on Monday as the sector begins to decipher the fallout from the war in the Middle East and its impact on stocks. 

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 U.S.

U.S.-listed shares of the French company fell over 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. 

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.

LVMH's fashion and leather goods division, its biggest unit including brands like Louis Vuitton, Dior and Fendi, declined 2% to 9.2 billion euros ($10.8 billion) in constant currencies in the quarter. Total revenue came in at 19.1 billion euros, slightly below expectations.

Watches and jewelry grew by 7% in the quarter on an organic basis, driven by a strong performance from Tiffany, and the company's wine and spirits division grew 5%.

Luxury stocks have fallen since the Iran war broke out in late February.

On a reported basis, LVMH sales declined 6% in the quarter, impacted by unfavorable exchange rates.

Local demand helped to partly offset lower tourist spending, LVMH said. Asia excluding Japan saw strong growth, "confirming the improvement in trends observed starting in the second half of 2025," the company added.

In 2025, the company's organic sales declined by 1%, with growth concentrated in the second half of the year.

The recovery in China remains at the top of investors' minds in 2026, as does the impact of the war in the Middle East – a region that's been one of the sector's few bright spots amid sluggish growth elsewhere. 

While the region 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 U.S. 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.

Beyond macro economics uncertinty, key risks for LVMH for the rest of 2026 include its ability to keep brand momentum around Louis Vuitton, while gradually improving Dior, Givenchy, and Celine, Barclays analyst Carole Madjo wrote in a note to clients in late March. 

Stabilizing its wine and spirits division, investing in cosmetics, and maintaining the solid performance of Sephora, will also be key, Madjo added as she predicted organic growth to recover to 5% in the second quarter.

"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, she added. "Against a backdrop of very negative market sentiment and depressed valuations, we think that even modest Q1 beats could be disproportionately rewarded."

Smaller luxury cashmere peer Brunello Cucinelli, the first major luxury name to report this earnings season, saw revenue jump 14% in constant currencies in the first quarter.

The Italian company beat expectations last week, sending shares higher. Asia, and China in particular, saw "further improvement compared to the already positive trend of the fourth quarter of 2025, confirming the growing appreciation for the brand throughout the region and its positioning in the highest segment of luxury," the company said.

Peers Hermes and Gucci-owner Kering are also slated to report earnings this week.