Luxury brands in UAE face profit squeeze amid Iran conflict

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Luxury brands in UAE face profit squeeze amid Iran conflict

April 13, 2026

Dubai Mall shopping luxury UAE — Dubai Mall, UAE. Photo: Creative Commons/pintrest

DUBAI,— Sales at Europe’s largest luxury brands have fallen in Dubai and Abu Dhabi after the Iran conflict hit the sector’s fastest growing market, marking another setback for the 400 billion dollar industry whose value has declined over the past three years.

Luxury brands reported March sales declines of 30 to 50 percent at Dubai’s Mall of the Emirates, one of the city’s largest shopping centers, compared with the same month a year earlier, a source familiar with the previously unreported figures said.

The figures indicate the impact of the conflict on luxury just as LVMH, Kering and Hermes are due to report quarterly sales this week.

Footfall at Mall of the Emirates, which houses boutiques from LVMH’s Louis Vuitton and Dior, Kering’s Gucci, Richemont’s Cartier, Chanel and Rolex along with an indoor ski resort and wellness clinic, fell 15 percent in March, the source said.

Traffic at the larger Dubai Mall, more popular with tourists, dropped about 50 percent, the sources added, suggesting an even steeper fall in sales.

In Abu Dhabi, a smaller shopping hub than Dubai and less reliant on tourist spending, March sales at the Galleria mall were more resilient but still down about 10 percent across the board, the second industry source said.

Companies operating Mall of the Emirates, Dubai Mall and the Galleria did not respond to requests for comment from Reuters.

LVMH, Kering and Hermes also did not respond to requests for comment on Middle East sales and the impact of the conflict.

The Gulf has been a strategic region for luxury.

Since the post-pandemic luxury boom ended in 2022 as China struggled to recover from COVID-19, the combined market value of LVMH and Kering has fallen by more than 100 billion euros, over a quarter of their value.

Marks Spencer luxury store shop Dubai UAE — A Marks Spencer luxury store in Dubai, UAE, March 2026. Photo: AFP

Annual industry sales fell 2 percent last year, according to consultancy Bain & Company.

The Middle East, about 5 percent of global luxury consumption, has been one of the sector’s few bright spots, with double-digit annual growth in recent years, said Carole Madjo, head of luxury research at Barclays.

It was definitely a strategic region. Everything was okay, Madjo added.

But Dubai’s carefully built image of glamour and stability has been shaken by the conflict that began with U.S. and Israeli strikes on Iran on February 28, 2026.

Dubai’s major airport hub has been targeted multiple times by Iranian drone attacks along with other infrastructure, while the city’s landmark Burj Al Arab hotel suffered some damage when debris from an interception hit its facade.

Getting back to normal will take months for the hub, even if diplomatic efforts succeed in ending the conflict in the near term.

Bernstein analysts said in a note this month that the conflict’s ripple effects, including higher oil and travel costs, inflation or a possible stock market rout, could easily disrupt shopper appetite beyond the Gulf, particularly in the United States.

If the expected luxury recovery in 2026 is delayed to the second half or next year, no one should be surprised, said Christopher Rossbach, portfolio manager at J Stern & Co in London.

LVMH is due to report first-quarter sales on Monday, followed by Kering and Hermes later this week. Kering will hold its capital markets day on Thursday.

Because the Middle East is relatively small, the conflict’s immediate impact on quarterly sales will be limited, but effects on profits, reported mostly half-yearly, could be larger, Rossbach said.

With low rents, low labor costs, high prices and no taxes, Dubai is among the most profitable luxury retail markets.

For brands like Louis Vuitton, Hermes and Chanel, annual sales per square meter in Dubai can exceed several hundred thousand euros, far above global averages, the source said.

(With files from Reuters)