Global retailers and luxury brands have temporarily shuttered stores across the Middle East as escalating conflict in the region disrupts travel, footfall and supply chains.
In Dubai and other major shopping hubs, a number of stores have closed entirely or are operating with skeleton teams as missile strikes and airspace shutdowns create uncertainty for businesses and consumers alike.
Regional retail operator Chalhoub Group, which runs around 900 stores for brands including Versace, Jimmy Choo and Sephora, confirmed that its Bahrain estate is closed. Stores in the United Arab Emirates, Saudi Arabia and Jordan remain open, but staff attendance has been made voluntary.
“We operate with a lean team formed of members who volunteered and feel comfortable to come to the store,” Chalhoub’s vice president of communications Lynn al Khatib told Reuters.
The group’s leadership team visited Dubai Mall and Mall of the Emirates on Monday morning to check in with employees.
Ecommerce giant Amazon has reportedly closed its fulfilment centre in Abu Dhabi, suspended deliveries across the region and instructed employees in Saudi Arabia and Jordan to remain indoors, according to Business Insider.
Meanwhile, Gucci-owner Kering said its stores were temporarily closed in the UAE, Kuwait, Bahrain and Qatar, and that it had suspended travel to the Middle East.
Luxury stocks slide as growth engine falters
The growing instability has rattled investors. Shares in luxury conglomerates LVMH, Hermès and Cartier-owner Richemont fell between 4 per cent and 5.7 per cent on Monday afternoon as markets digested the potential impact.
Although the Middle East accounts for just 5 to 10 per cent of global luxury spending, according to RBC analyst Piral Dadhania, the region has been one of the sector’s brightest performers over the past year.
Consultancy Bain previously described it as luxury’s strongest growth market in 2023, at a time when sales of high-end handbags and accessories have slowed in China and parts of Europe.
Airport closures and suspended flights have abruptly halted inbound tourism, a key driver of regional luxury sales. Missile strikes, including one that reportedly damaged Dubai’s five-star Fairmont Palm hotel, are also likely to deter travellers if the conflict drags on.
Victor Dijon, senior partner at consultancy Kearney, said that if the region’s travel retail market (estimated at between $5bn and $6bn, roughly £3.9bn to £4.7bn) were to shut down for a month, “hundreds of millions of dollars” in sales would be at risk.
He added that a prolonged halt to outbound travel could also hit European luxury hubs such as Paris and Milan, as Middle Eastern shoppers are among the highest spenders in those markets.
Investment plans under scrutiny
The disruption comes at a time when many brands have been doubling down on expansion across the Gulf.
Cartier recently unveiled a high jewellery exhibition in Dubai’s Keturah Park, while LVMH’s flagship brand Louis Vuitton staged an exhibition at the Jumeirah Marsa Al Arab hotel last month. Beauty retailer Sephora also launched its first Saudi beauty brand in recent weeks.
LVMH does not break out regional figures but in January its chief financial officer, Cécile Cabanis, said the Middle East had been “displaying significant growth”.
Mass-market players have also been targeting the region. Budget fashion retailer Primark announced in January that it plans to open three stores in Dubai across March, April and May, followed by stores in Bahrain and Qatar later this year.
“Primark is set to open its first store in Dubai at the end of March but clearly this is a fast-moving situation which we are monitoring closely,” a spokesperson for Primark-owner Associated British Foods said.
Elsewhere, Apple’s Dubai stores are closed until at least Thursday morning, according to its website. H&M confirmed that its stores in Bahrain and Israel are shut.
Consumer goods group Reckitt has instructed all Middle East employees to work from home, temporarily closed its Bahrain manufacturing site and suspended business travel to the region.
With no clear end to the conflict in sight, retailers face mounting uncertainty in a market that had become an increasingly important pillar of global growth.
For luxury in particular, the Middle East had offered rare momentum in an otherwise slowing sector. Now, that growth engine is under acute threat.
Click here to sign up to Retail Gazette‘s free daily email newsletter
