A woman walks in front of the Gucci store on Fifth Avenue in Trump Tower on February 24, 2021 in New York City.
John Smith | Corbis News | Getty Images
Luxury stocks plummet early Wednesday due to Gucci owner kering and hermes The company announced first-quarter results that disappointed investors as the Middle East conflict hurts luxury goods sales.
Hermès shares plunged 14%, while Kering fell 10%. The companies’ updates also weighed on the broader luxury goods sector. burberry, christian dior, LVMHand moncler Worst performing companies in the pan-European region Stoxx600 indexdecrease between 2% and 3%, respectively.
Hermès said on Wednesday that “sales at group stores increased by 7% despite a slowdown in tourist flows related to the situation in the Middle East,” with first-quarter sales of 4.1 billion euros ($4.8 billion) and total sales up 5.6% year-on-year. Analysts had expected 7.1%.
“Wholesale trade was significantly impacted by reduced sales, particularly to the Middle East and airport kiosks,” the company added.
Jefferies analyst James Gruzinich said the drop in Hermès shares reflects two concerns. It’s very difficult exposure to the Middle East and concerns about China’s slowing momentum.
meanwhile, kering Gucci, the luxury conglomerate’s biggest brand, remains hampered despite efforts by new CEO Luca de Meo to turn around the company’s fortunes, reporting lower-than-expected sales late Tuesday.
Gucci sales decline as Kering looks to change direction
Kering reported first-quarter sales of 3.57 billion euros. This was down 6% year over year on a reported basis and flat on a comparative basis at constant exchange rates.
Gucci’s organic sales fell 8%, a sharper decline than the sell-side consensus of 6% cited by analysts.
Kering, which also owns the Yves Saint Laurent, Bottega Veneta and Balenciaga brands, said retail revenue in the Middle East fell 11% in the first quarter, following growth in the first two months of the year.
With 79 stores in the region, the Middle East accounts for approximately 5% of retail revenue.
Despite disappointing results, investors’ attention is firmly focused on the company’s Capital Markets Day on Thursday, when DeMeo will unveil Kering’s strategic roadmap, ReconKering.
“Gucci remains our top priority. A comprehensive turnaround is underway, with decisive action across our clients, distribution and, above all, our offer,” DeMeo said in a statement after the bell on Tuesday.
Bernstein analyst Luca Sorca described the results as a “reality check.”
“The latest Q1 2026 information shows what we have observed time and time again in the self-help story: It is easier and faster for the market to believe in a comeback than for management to create one,” the analyst said.
Kering stock has outperformed most of its peers over the past year.
This comes as Kering, like many luxury brands, has experienced years of contraction after a boom that ended in 2022. Demand surged during the coronavirus pandemic, leading to soaring prices and ultimately driving customers away. Coupled with weak demand in China, which was once one of the sector’s main growth drivers, companies have suffered.
Last year, Kering appointed Mr. DeMeo to help put the company back on a growth track. His selection was a surprise to many given his background in the auto industry, but the stock has risen about 10% since he officially took over on Sept. 15, outperforming most of his peers as investors grew optimistic about his turnaround plan.
Impact on the Middle East
Although the region accounts for a relatively small portion of sales for major luxury companies (typically in the mid-single digits), it has become a bright spot in a mostly depressed sector where many companies are struggling to return to growth.
Still, stocks have fallen significantly since the US and Israel first attacked Iran on February 28th. Global markets remain unstable due to the unfolding energy crisis caused by the de facto closure of the Strait of Hormuz.
“Increased global uncertainty is causing great anxiety, especially among investors who were hoping for a rebound in luxury goods demand this year,” UBS analyst Zussanna Pusch said in late March.
Industry leader LVMH said on Monday that the Middle East conflict had a 1% negative impact on organic growth in the quarter.
“When the conflict started in March, there were shortages and demand deterioration of between 30% and 70%, depending on the mall and the company,” said Cecile Cabaniss, LVMH’s chief financial officer.
But analysts noted fundamental improvements, including strong spending by customers in the U.S. and China.
