By Andrea Figueras
Hermes said the Iran war hit first-quarter sales, dragging the Birkin-bag maker's shares sharply lower and throwing fresh doubt onto the luxury sector's hopes of a revival this year.
The French group cited geopolitical tensions and reduced tourism stemming from the Middle East conflict for slower revenue growth over the first three months of the year, with sales of 4.07 billion euros ($4.80 billion) falling short of analysts' expectations.
At current exchange rates, quarterly sales declined on year due to a heavily negative impact from currency effects.
The update sent shares in the Parisian luxury house down more than 14% in early European trading, the sharpest intraday fall since the group first listed more than 30 years ago. The news also prompted share declines across Europe's luxury-goods sector.
Hermes showed a soft start to 2026, with most categories below expectations, Citi's Thomas Chauvet and Alberto Cecchetto wrote in a note.
Luxury brands have been struggling for years with shrinking demand for high-end goods, as well as tough market conditions including trade disputes and geopolitical instability. The industry had hoped for a recovery this year, driven by better results in crucial markets like the U.S. and China, but the war in Iran has cast a shadow over those expectations.
Rival LVMH, the owner of Louis Vuitton and Dior that is considered a pacesetter for the luxury industry, earlier this week posted weak first-quarter sales, citing a disrupted environment stemming from the conflict. Kering, the parent company of the Gucci brand, noted the broader outlook depends on potential impacts on global tourism trends and the macroeconomic backdrop.
Given the results from LVMH and Kering, Hermes's sales miss is broadly in line with the trend seen so far, analysts at Deutsche Bank wrote in a note to clients. However, the bar was higher for the latter, which is considered the highest-quality company in the industry, Deutsche said.
Similar to Italy's Brunello Cucinelli, Hermes targets the very wealthy, who have continued to spend freely on luxury goods. This approach has allowed the company to outperform most of its competitors in the luxury space that cater to less well-off customers, who have been cutting back on luxury spending in recent years due to the difficult economic climate.
Despite showing resilience in previous quarters, analysts at UBS warned in a note prior to results that Hermes wasn't immune to industry challenges.
Hermes said that despite the slowdown in tourist flows linked to the war in the Middle East, which hit the company's performance in its French home market, sales in the group's stores increased by 7%. Wholesale activity was significantly affected by lower sales to concession stores, particularly in the Middle East and in airports.
In the region directly affected by the war, Hermes saw a significant impact from March onward, notably in the United Arab Emirates, as well as in Kuwait, Qatar and Bahrain.
Write to Andrea Figueras at andrea.figueras@wsj.com
(END) Dow Jones Newswires
04-15-26 0815ET
