Since the beginning of the year, the shares of the house have lost in price about 28%. As RBC notes with reference to Reuters, such dynamics is a consequence of the conflict in the Middle East. Its escalation has led to a decline in tourist activity in Europe, as well as a drop in sales in the Middle East.
For the first quarter of 2026, sales of handbags, silk scarves and perfumes grew just 5.6% in comparable currencies, worse than Visible Alpha’s consensus forecast of 7.1%. Deutsche Bank analysts said the results indicate “zero underlying sales growth” as the company raised prices by about 6% at the beginning of the year.
Weak tourism has affected the “luxury” sector
In its latest report, Hermes said sales in the Middle East were down 5.9%. And while the region only accounts for about 4.4% of demand, it was the fastest-growing region for the company last year. Revenue in France, where more than 50% of Hermes’ sales come from tourists, also fell 2.8% due to lower spending by travelers. Chief Financial Officer Eric du Algue said Hermes stores in France, Switzerland and the UK were attracting fewer customers from the Middle East. Italy also suffered, but was more resilient.
In Asia, sales growth amounted to only 3.5% – air travel disruptions hit stores in Singapore and Thailand particularly hard. At the same time, the USA became an exception – there sales grew by 17.2%.
In addition to the drop in sales in Europe and the Middle East, another problem for the luxury brand was the strong euro exchange rate. It reduced Hermes’ revenue by about 290 million euros for the quarter, which led to a 1% drop in reported revenue to 4.07 billion euros from 4.13 billion euros a year earlier.
Paris bourse collapses
Note that Hermes is not the only luxury brand that has seen its performance deteriorate due to the war in the Middle East.
For example, the securities of Kering, the owner of the Gucci brand, fell by more than 10% on Wednesday after the company said the conflict had hit customers’ spending.
LVMH Moet Hennessy Louis Vuitton, which owns luxury brands Christian Dior, Louis Vuitton and Tiffany & Co. made a similar statement. According to the results of the first quarter, its shares showed the worst result in the history of the company – on the Paris stock exchange they fell by 28%.
