Middle East war affects airport shopping luxury brand sales decline

From DFS to Avolta, duty-free shops selling high-end perfumes and spirits to high-spending consumer groups have felt the pressure as the Middle East conflict has led to airport closures, hindering travel to the region, and with the war continuing, this setback could become even more severe. This interruption has entered its sixth week, exposing vulnerabilities in luxury and beauty conglomerates that rely on airport shopping and the Gulf region as a hub - one of their most profitable channels - to offset weak demand in Europe, making even short-term airport closures potentially drag down quarterly profits. Analysts say that the long-term slump in Middle East air traffic could exacerbate pressure on the travel retail industry still recovering from the COVID-19 pandemic, squeezing underperforming businesses under LVMH such as DFS, and dragging down well-known beauty and luxury companies such as Estee Lauder, Puig, and L'Oreal. In the first half of March, international flights to and from the Middle East were drastically reduced. While some airlines in the United Arab Emirates are slowly resuming flights, the flight volumes are still far below normal levels. Data from Cirium shows that, except for Turkey, the flight cancellation rate in the Middle East has decreased from 65% at its peak on March 3 to 13% on March 27, but the number of flights scheduled has also dropped. LVMH Group's Chief Financial Officer, Cyril Cabanes, told analysts this week that DFS "lost growth for its selective retail sector by two " due to the conflict. The LVMH Group stated that due to reduced consumption in the Gulf region, the conflict has led to a decrease in group sales by at least 1% for the latest quarter.