Luxury Sector Plummets: Hermes and Kering Shares Tank as Iran Conflict Disrupts Middle East Retail and Global Travel

Shares of Hermes and Kering plummeted following Q1 2026 earnings reports showing significant sales declines in the Middle East due to the ongoing Iran war.

By: AXL Media

Published: Apr 16, 2026, 9:01 AM EDT

Source: CNBC

Hermes Misses Growth Targets Amid Regional Turmoil Despite a year-on-year sales increase to 4.1 billion euros ($4.8 billion), Hermes shares fell 8.2% after the company revealed that activity was "significantly affected" by the situation in the Middle East. Total sales growth of 5.6% fell short of the 7.1% anticipated by analysts. The company noted that while in-store sales remained resilient with a 7% increase, wholesale and concession activity particularly in Middle Eastern airports took a major hit. Analysts from Jefferies suggest that the drop reflects a "double fear": heavy exposure to the volatile Middle Eastern market and mounting concerns regarding a slowdown in Chinese consumer momentum.

Kering and Gucci Struggle with Strategic Turnaround Kering, the parent company of Gucci, reported a 6% decline in reported revenue to 3.57 billion euros. The conglomerate's flagship brand, Gucci, saw organic sales fall by 8%, underperforming even the pessimistic 6% decline projected by sell-side consensus. Kering specifically flagged an 11% drop in Middle East retail revenue for the first quarter. This comes at a sensitive time for the group, as new CEO Luca de Meo formerly of the auto industry attempts to implement a comprehensive turnaround strategy dubbed "ReconKering." Investors are now looking toward Thursday's Capital Markets Day for a clearer roadmap on how the group intends to revitalize its core brands.

Broader Sector Contraction and the "1% Impact" The negative sentiment rippled across the Stoxx 600, dragging down other luxury giants including Burberry, Christian Dior, and Moncler. Earlier in the week, industry bellwether LVMH estimated that the Middle East conflict had a 1% negative impact on its organic growth. LVMH CFO Cécile Cabanis provided a stark look at the regional impact, noting that since the conflict intensified in March, demand in certain Middle Eastern malls deteriorated between 30% and 70%.

Geopolitical Risks: The Energy Crisis and Supply Chains The market volatility is compounded by broader geopolitical fears, specifically an emerging energy crisis. The effective closure of the Strait of Hormuz has generated significant anxiety regarding global supply chains and inflation. UBS analysts noted that investors who were banking on a 2026 recovery in luxury demand are now forced to re-evaluate as "elevated global uncertainty" becomes the new ba...