PARIS: Many stores in Dubai and other major Middle Eastern shopping hubs are closed or operating with staff only, as the region’s escalating conflict disrupts businesses and travel.
The U.S. and Israeli air war against Iran escalated with no end in sight on Monday, with Tehran firing missiles and drones into the Gulf nation in retaliation for the weekend bombing that reportedly killed Iran’s supreme leader and killed scores of Iranian civilians, including an attack on a girls’ elementary school.
Chalhoub Group, which operates 900 stores in the region with brands ranging from Versace and Jimmy Choo to Sephora, said its stores in Bahrain were closed but other markets such as the United Arab Emirates, Saudi Arabia and Jordan remained open despite staff attendance being “voluntary”.
“We operate with a lean team of volunteers, so you can feel safe coming into our stores,” Rin Al Khatib, Chalhoub’s vice president of communications, told Reuters, adding that the company’s management personally visited Dubai Mall and Mall of the Emirates on Monday morning to check on the status of employees.
E-commerce giant Amazon has shut down its fulfillment center operations in Abu Dhabi, suspended deliveries across the region and directed employees in Saudi Arabia and Jordan to stay indoors, Business Insider reported on Monday, citing an internal memo.
Gucci owner Kering said it had temporarily closed stores in the United Arab Emirates (UAE), Kuwait, Bahrain and Qatar, and suspended travel to the Middle East.
Luxury growth engine under threat
Shares in luxury brand group LVMH, Hermès and Cartier owner Richemont fell between 4% and 5.7% on Monday afternoon as investors digested the fallout from the dispute.
The Middle East still accounts for a small share of global luxury spending at 5% to 10%, said Pilar Dadania, an analyst at RBC. But while the region was “the brightest performer in the luxury goods industry” last year, sales of expensive handbags have stagnated in other parts of the world, according to consultancy Bain.
Now, with airports closed and the flow of tourists to the region abruptly halted, missile attacks, including damage to Dubai’s five-star Fairmont Palm hotel, are likely to deter travelers, especially if the conflict drags on.
“If you assume the (travel retail) market is $5 billion to $6 billion and it’s shut down for a month, you’re definitely putting hundreds of millions of dollars at risk,” said Victor Dijon, senior partner at consulting firm Kearney.
Luxury sales in Europe could also be negatively affected if Middle Eastern shoppers are unable to travel to Paris or Milan, he added.
Luxury brands have been investing in luxury new stores and special events throughout the region. Cartier held a “High Jewelry” exhibition in Dubai’s Keturah Park days before the conflict began. Cartier and Richemont did not respond to requests for comment.
Luxury conglomerate LVMH is also betting big on the region. Last month, flagship brand Louis Vuitton held an exhibition at the Jumeirah Marsa Al Arab Hotel, and beauty retailer Sephora launched its first Saudi beauty brand.
LVMH did not release specific figures for the region, but Chief Financial Officer Cecile Cabanis said in January that the Middle East region was “showing significant growth.” LVMH did not respond to a request for comment on how its business may be affected by the dispute.
The Middle East is also attracting new investments from mass market players. Low-cost fashion retailer Primark has announced plans to open three stores in Dubai in January, March, April and May, followed by stores in Bahrain and Qatar by the end of the year.
A spokesperson for Primark’s owner, Associated British Foods, said: “Primark is due to open its first store in Dubai at the end of March, but clearly this is a rapidly evolving situation and we are monitoring it closely.”
The Apple Store in Dubai will be closed until Thursday morning, while Swedish fast fashion retailer H&M said its stores in Bahrain and Israel are closed, according to the company’s website. Consumer goods group Reckitt has instructed all employees in the Middle East to work from home, temporarily closed its manufacturing site in Bahrain and suspended all business travel to the region until further notice. (Reporting by Helen Reid, James Davey, Alex Murrow, Greta Rosen Fondern and Dominic Patton; Editing by Alan Barona)
