The news: LVMH’s growth accelerated in Q2 as its creative shakeup appealed to resilient luxury consumers, helping offset headwinds from the war in the Middle East.

By the numbers: Organic revenues rose 3% YoY, up from 1% growth in Q1. The conflict in the Middle East hurt topline growth by 1 percentage point, though it didn’t significantly shift LVMH’s geographic mix.

• Growth was driven by the US, where organic sales rose 6% YoY, Japan (up 14% YoY), and Asia (up 6% YoY), which offset a slight decline in European sales.
• The company’s core fashion and leather goods division grew 1%, slightly less than expected but marking the unit’s return to growth after two years of declines.

Implications for luxury: While the war in Iran is dampening growth, overall luxury demand remains fairly resilient. As LVMH CFO Cécile Cabanis noted on the company’s earnings call, “where wealth is created, consumer appetite for luxury and for [LVMH] products in particular is strong.” Demand in the quarter was driven mainly by local consumers rather than tourists—an indication that the typical LVMH shopper is more focused on obtaining their desired product immediately than taking advantage of more favorable exchange rates overseas.

But as LVMH’s lackluster performance over the past several quarters makes clear, luxury shoppers do not purchase indiscriminately. Creative changes at Dior, Céline, and Fendi, coupled with product innovation, are helping to increase interest in those brands, but the strongest growth is coming from hard luxury categories like watches and jewelry, which are more likely to hold their value and are less trend-dependent.

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