Fashion Unit Takes Middle East Hit, But LVMH Proves Resilient In Q1

French luxury giant LVMH Moët Hennessy Louis Vuitton delivered first-quarter results that were down by 6% to €19.12 billion ($22.5 billion). This is yet another decline after last year’s 5% contraction. However, despite the impact from the continuing Middle East crisis—which has even led to a Vatican appeal for de-escalation—LVMH grew by around 1% in Q1 on an organic basis. The key negative impact was a 7% fluctuation in exchange rates.

Organic revenue for the luxury conglomerate—whose mega brands include Louis Vuitton, Dior, and Tiffany—refers to a like-for-like comparison that strips out currency and some other factors. On this basis, three of the company’s five business units grew, led by watches and jewelry at 7%, wines and spirits up 5%, and selective retailing at 4%.

The company’s biggest business unit of fashion and leather goods was hardest hit by the Middle East situation, declining by 9% (2% organic) to €9.25 billion ($10.9 billion). However, the United States and Asia (excluding Japan) have shown resilience with organic growth of 3% and 7% respectively which took the edge off declines in other markets. LVMH has also continued to invest in its core Louis Vuitton brand as it celebrates the 130th anniversary of its iconic Monogram design this year.

LVMH released its results after markets closed on Monday evening. They could have been worse, given the closures and/or lower footfall at many stores across the Gulf states, the lack of tourists in March in places like Dubai and Abu Dhabi, as well as fewer Middle Eastern travelers in key shopping destinations in Europe, for example.

Sharon Iles, senior apparel analyst at intelligence platform GlobalData, said: “LVMH’s Q1 results demonstrated a degree of resilience, with organic revenue growth of 1%. However, the results fell short of industry hopes that 2026 would mark a turning point after a protracted downturn.”

Tuesday’s market reaction was muted, with the stock hardly changed from the previous night, closing at €481.45. This, however, comes on the back of a huge decline of 25.5% in the LVMH share price in the first quarter of the year, reflecting wider worries about luxury stocks. This will be exacerbated if the conflict with Iran persists.

For now, LVMH seems to have escaped lightly, helped by the company citing that the war in the Middle East had a limited negative impact of around 1% on organic growth for the quarter. Given that it only affected the month of March, this could intensify in Q2 if it drags on.

Like Amazon’s bullish approach despite the Iran crisis, LVMH remains positive for the rest of the year. In a statement, the company stated: “Amid a geopolitical and economic environment particularly disrupted by the Middle East conflict, LVMH remains vigilant yet confident at the start of the year. The group remains focused on the development of its brands, driven by a policy of innovation and investment.”

The French company has demonstrated this with the opening of a flagship store designed by renowned architect Jun Aoki for Louis Vuitton in Beijing, and LV The Place in Seoul. Both have been reported by the company as achieving “excellent performance.” The first bags designed by Jonathan Anderson for Christian Dior have also been landing in stores and are said to be “immensely popular.” Meanwhile, the lesser-known brands—Loro Piana and Rimowa— performed well within the fashion division in the first quarter.

Across other divisions, watches and jewelry had the strongest performance with 7% organic growth followed by wines and spirits at 5%. In the former business unit, Tiffany and Bvlgari largely drove the momentum, while in the latter, growth was helped by the stabilization of the champagne business, particularly in Europe, and a boost to cognac sales at Chinese New Year. The Perfumes & Cosmetics division was flat in organic terms, though Parfums Christian Dior helped to offset declines by some other brands.

In the selective retailing unit, organic revenue rose by 4% in Q1, driven by Sephora, which continued to grow in all regions, leading to gains in market share. The beauty retailer’s network also expanded, particularly in the United Kingdom. Meanwhile, the DFS deal to sell its Hong Kong and Macau Gallerias to China Tourism Group Duty Free was concluded in March. This followed the travel retailer’s handoff of its U.S. airport retail business at Los Angeles and San Francisco airports to Duty Free Americas.

This article was originally published on Forbes.com