LVMH reported first-quarter revenues down 5% year-on-year with operating profit declining at a steeper rate, while Hermès posted flat growth and Kering warned of continuing underperformance. The unified signal: Middle East demand, which carried European luxury through late 2024 and early 2025, has evaporated without warning. Gulf buyers represented an estimated €12 billion in annual luxury spend across the three houses—gone in ninety days.
LVMH's quarterly filing shows Fashion & Leather Goods down 7%, Watches & Jewelry down 9%, with Selective Retailing (DFS, Sephora Middle East) posting double-digit declines. Kering's Gucci brand, already struggling with creative transition, saw Middle East comps fall 22% in the quarter. Hermès, by contrast, reported +1% global sales growth with Middle East exposure down but Europe and Japan offsetting. The Dumas family's controlling stake in Hermès—valued at approximately €78 billion as of April 2025—has declined 3% year-to-date, the mildest drawdown among European luxury dynasties.
The Gulf collapse stems from three concurrent shocks: heightened regional geopolitical tension curtailing travel retail, oil revenue volatility pressuring sovereign and private wealth, and a marked shift in Chinese buyers who previously shopped Dubai now routing through Hong Kong or delaying purchases entirely. LVMH's DFS unit, which operates luxury retail in Dubai and Doha airports, saw foot traffic fall 31% quarter-on-quarter. Hermès CEO Axel Dumas, speaking at the brand's October 2025 Paris show alongside Anna Wintour, acknowledged "temporary disruption in certain travel corridors" but declined to quantify Middle East exposure. Kering provided no Middle East breakdown but noted "unforeseen macroeconomic headwinds in non-European markets."
Hermès' resilience rests on product scarcity and a client base less sensitive to quarterly volatility. The brand's waiting lists for Birkin and Kelly bags remain multi-year in major cities, and its direct distribution model—85% of sales through owned stores—insulates it from wholesale and travel retail volatility. LVMH and Kering, with broader portfolios and higher wholesale exposure, face inventory buildups in leather goods and ready-to-wear categories that typically cleared through Gulf distributors. Kering is worst-positioned: Gucci's creative reboot under Sabato De Sarno has yet to stabilize sell-through, and the brand now faces a €2.1 billion inventory overhang with limited channels to clear it.
Allocators should monitor three developments over the next sixty to ninety days: LVMH's May wholesale order books for Fall/Winter 2025 will reveal whether European and American department stores are cutting buys in anticipation of prolonged weakness; Hermès' June shareholder meeting may clarify whether the Dumas family is considering any liquidity events or strategic partnerships given valuation compression; and Kering's Q2 guidance, expected late May, will show whether management writes down Gucci inventory or attempts to defend margin through production cuts.
Saudi Arabia's Public Investment Fund reduced its LVMH position by 1.2% in March, the first decrease since the fund initiated the stake in 2022.
The takeaway
Middle East luxury demand collapsed without replacement channels—Hermès' scarcity shields wealth, LVMH faces margin pressure, Kering holds unsellable inventory.
Editorial & Disclosure Notice: This article was written with artificial intelligence from public sources and is published without individual human review. Artificial intelligence and other digital tools are also used for research, analysis, editing, formatting, and production. Errors, omissions, outdated information, or inaccuracies may occur. References to companies, brands, products, services, organizations, or individuals are for informational and editorial purposes and do not imply endorsement, sponsorship, affiliation, partnership, or approval unless expressly stated. All trademarks and other intellectual property remain the property of their respective owners. Opinions, analysis, estimates, and commentary are informational only and should not be construed as financial, investment, legal, tax, medical, procurement, or other professional advice. Information may be corrected, clarified, or updated after publication. Corrections or removal requests: jenny@pops4.com.
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