Middle East Luxury Sales Fading as Oil Falls and Tourism Slows

At first glance, it might not seem like wallets are tight inside Riyadh’s Centria Mall. On a weekday afternoon, women with covered faces stroll the halls, drifting in and out of Dior and Burberry outlets.

But they’re not buying like they did last year, says Mohammed Fahmawi, a manager at the Saudi Arabian mall’s Gucci store. A year ago, more than 100 customers would come through his doors daily, Fahmawi said. Now, it gets 20 on a good day. Traffic’s also down at the Cartier store nearby.

“People are afraid,” he said, citing the economic slowdown brought on by the oil price slump. “They don’t want to spend their money.”

Falling crude prices have crimped the spending power of luxury-goods consumers in the Middle East, while a weak ruble means fewer free-spending Russians have visited the region, according to consultant Bain & Co. Burberry Group Plc and Milan-based Prada SpA have said their sales in the region have been hurt by a lack of visitors.

“We’ve experienced a fairly strong drop in traffic in the Middle East,” said Hermes Chief Executive Officer Axel Dumas.

Middle-East luxury sales rose just 1 percent to 8.1 billion euros ($9.2 billion) in 2015, slowing from the region’s 4 percent gain in 2014, Bain estimates. A fifth of respondents in a survey of Persian Gulf countries published last month, said they cut luxury consumption in 2015, compared with 13 percent a year earlier.

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