French luxury conglomerate LVMH reported a modest increase in first-quarter sales, tempered by the ongoing conflict in the Middle East, which has weighed on demand in the Gulf region and Europe. The group’s results underscore concerns about the war’s impact on the luxury sector’s fragile recovery.

LVMH, owner of prominent brands including Louis Vuitton, Dior, Bulgari, and Hennessy, said the conflict in Iran reduced its overall group sales by at least 1 percent during the quarter due to diminished consumer spending in the Gulf. The decline in tourist arrivals across European markets also contributed to weaker sales performance in the region. Adjusted for currency fluctuations, global sales rose by 1 percent, falling short of analyst expectations for a 1.5 percent increase.

The group’s finance chief, Cécile Cabanis, highlighted that demand in the Middle East remains substantially depressed, with mall traffic in the region — which accounts for approximately 6 percent of LVMH’s revenue — down between 30 and 70 percent since the onset of the conflict at the end of February. She indicated that a loss in sales in this market tends to disproportionately affect profit margins.

Sales at LVMH’s core leather and fashion division, responsible for nearly 80 percent of the company’s operating profits last year, dropped 2 percent organically, exceeding analyst forecasts of a 1 percent decline. This marked the division’s seventh consecutive quarter of declining revenues. Performance across flagship brands Louis Vuitton and Dior was consistent with the broader division trends. In Europe, sales contracted by 3 percent, impacted by a strong euro and the broader geopolitical instability.

Despite challenges in the Middle East and Europe, the United States emerged as a relative bright spot, with organic sales in the region increasing 3 percent. According to the company, consumer demand in the U.S. has remained resilient, untouched so far by the war. Credit card data cited by analysts from Citi corroborated continued rising luxury spending in America during the first quarter, with shoppers focusing on higher-value items. However, consumer sentiment in the U.S. hit a record low in early April amid expectations of rising inflation over the coming year.

LVMH shares declined sharply following the earnings release, dropping 3.75 percent on U.S. markets. Gucci owner Kering’s shares also slipped 1.5 percent amid investor concerns over the conflict’s broader effects on the sector. Overall, shares in LVMH have fallen nearly 26 percent since the start of the year, marking one of the largest declines among European large-cap stocks.

While the Middle East crisis has dampened immediate outlooks, most market analysts continue to expect growth in the luxury industry through 2026. LVMH report noted improving trends in several key markets, including China, but cautioned that the geopolitical environment remains uncertain and could continue to constrain demand. Investors appear to remain cautious as the sector contends with ongoing regional instability, inflationary pressures, and fluctuating consumer sentiment worldwide.