U.S.-Iran conflict collapses retail: luxury giants lose millions
According to according to Reuters, some boutiques in shopping centers in Dubai and other cities in the region have suspended operations. The aggravation began after the beginning of the air campaign of the United States and Israel against Iran. In response, Tehran launched strikes on facilities in the Gulf countries where U.S. military bases are located.
One of the Middle East’s largest luxury retail operators, Chalhoub Group, which operates about 900 stores including Versace, Jimmy Choo and Sephora boutiques, closed its outlets in Bahrain. In the UAE, Saudi Arabia and Jordan, stores formally remain open, but visitation for staff has been made voluntary. The company’s management conducted an inspection of Dubai’s largest malls to assess the situation on the ground.
French group Kering, which owns the Gucci brand, closed stores in the UAE, Kuwait, Bahrain and Qatar and canceled business trips to the region. Apple suspended its stores in Dubai and H&M closed outlets in Bahrain and Israel. Britain’s Reckitt switched its employees to a remote format, temporarily shut down its Bahrain plant and froze business travel.
Against the background of the events, investors record a fall in the quotations of luxury companies. Shares of LVMH, Hermès and Richemont fell by 4-5.7%. Although the share of the Middle East in global luxury sales is estimated at only 5-10%, the region has been considered one of the most promising areas for growth in recent years.
For example, Cartier opened an exhibition in Dubai shortly before the escalation, Louis Vuitton held a large-scale event at the Jumeirah Marsa Al Arab Hotel, and Sephora was actively developing local projects in Saudi Arabia. British retailer Primark planned to launch three stores in Dubai this spring with further expansion into Bahrain and Qatar.
Experts warn: if the crisis drags on, the cumulative losses of retailers could reach hundreds of millions of dollars. An additional risk is associated with a possible reduction in foreign travel of Middle Eastern customers to the European fashion capitals of Paris and Milan, which could have a negative impact on sales in the EU.
