4 Takeaways From Luxury’s Q1 Earnings

Reported by Vogue.

The luxury sector entered 2026 hoping for a quiet comeback. Instead, it got a reality check. According to Vogue, HSBC projected 5.5% global luxury sales growth in Q1 — but the actual average organic growth across LVMH, Kering, Hermès, Moncler, and Prada landed at 4.2%. "Q1 didn't really change the sector's outlook, and, if anything, it slowed down or pushed back the recovery story we had in mind," said Carole Madjo, Barclays head of European luxury goods research. The culprit? The ongoing Middle East conflict, which shaved an estimated 1 to 2 percentage points off sales growth for the industry's biggest names — and disrupted the tourism flows that European flagship stores depend on.

The exposure varies by house. LVMH derives roughly 6% of sales from the Middle East, Kering around 5%, and Hermès approximately 4.3% — closer to 8% when accounting for Middle Eastern spending abroad, per Jefferies estimates. LVMH CFO Cécile Cabanis reported demand deterioration in the region of between 30% and 70% at the onset of conflict, depending on location. Hermès briefly closed or reduced hours at its Dubai, Bahrain, and Kuwait stores; its Middle East sales dropped 6% in Q1. Prada fared worse, with regional retail sales down 22%. The hope is that wealthy Middle Eastern clients will redirect spending to London, Paris, or elsewhere — but as Cabanis put it bluntly: "What we have not seen yet is repatriation."

Hermès Stumbles, Jewelry Runs

Hermès, typically the sector's untouchable frontrunner, had its worst moment in recent memory when Q1 sales growth of 5.6% missed the 7% analyst forecast — sending shares down 8% in a single session. The underperformance wasn't just a Middle East story. Asia-Pacific growth slowed to 2.2%, down from 8% in Q4 2024, and France — where more than half of sales come from international visitors — saw a 2.8% decline. Bernstein analyst Luca Solca flagged "fading brand momentum" as competitors accelerate creative reinvention. Full-year forecasts, previously set at 9–10% growth, are being revised down. Meanwhile, Hermès executive chair Axel Dumas confirmed couture plans are advancing — "What I have seen is amazing," he said — suggesting the house is betting on elevation, not just volume.

While soft luxury struggles, jewelry is the sector's clearest bright spot. LVMH's watches and jewelry division grew 7%; Kering's jewelry arm surged 22%; Hermès jewelry climbed nearly 10%. TD Cowen analyst Oliver Chen called jewelry momentum "the strongest" in the market, a signal that bodes well for Richemont — Cartier's parent company — ahead of its May 22 earnings. China is also stabilizing faster than feared: LVMH posted 7% Asia-ex-Japan growth, its best regional performance since 2023, and Moncler obliterated expectations with 22% Asia revenue growth against an 11% consensus forecast. The K-shaped economy Chen describes — where top-tier spending holds while aspirational consumers pull back — is playing out in real time across every major market.

The luxury industry isn't in freefall, but the path back to easy growth has gotten considerably harder — and the houses that adapt their travel strategy, clienteling, and brand heat fastest will be the ones that come out ahead.

Read the original at Vogue.