Will 2026 mark a return to growth for the struggling luxury market?

Paris, France - After a marked slowdown over the past two to three years, driven by price hikes, a lack of creativity and a downturn in China, the luxury sector hopes to navigate the clouds of geopolitical instability in 2026 to return to growth.

Global leader LVMH will be under particular scrutiny, as the group kicks off the reporting season for first-quarter sales figures late on Monday.

The sector, which reached post-Covid-19 peaks, faced significant challenges in 2024 and 2025. While not all groups experienced the same fate, consumers generally did not embrace price increases or stylistic choices with the same enthusiasm as before.

“The post-covid effect saw a considerable increase in activity, purchases and turnover, driven by the return of customers and a kind of revenge spending,” highlights Christophe Caïs, head of the luxury consultancy firm CXG.

“There were, however, very significant price increases that discouraged the aspirational clientele,” he notes. This group is made up of occasional customers who aspire to luxury but lack the means of high-income buyers.

The bank HSBC even speaks of “self-inflicted wounds” by companies in a recent report, citing a current “lack of creativity” and price hikes exceeding cost increases.

Other reasons for the decline include the slowdown in the Chinese market, a major driver in recent years. Since the end of February, the war in the Middle East has added further pressure on the luxury sector. According to a study by Bernstein analysts, the region accounts for approximately 6 percent of the sector's sales. The impact remains difficult to measure as it will depend on the duration of the conflict.

Newcomers

In terms of figures, in 2025, the French giant LVMH reported a 13 percent drop in net profit to 10.9 billion euros (12.74 billion dollars), with sales down 5 percent to nearly 81 billion euros.

For its compatriot Kering, the situation was even more challenging. Annual sales fell by 13 percent to 14.7 billion euros, and net profit was divided by more than ten, mainly due to the difficulties at its flagship brand, Gucci.

Across the Channel, British brand Burberry fell into the red for its 2024/2025 financial year. The brand, famous for its tartan, subsequently announced cost-saving measures affecting 1,700 jobs.

Luxury industry witnesses series of designer changes

Luxury houses have finally reacted, according to specialists interviewed by AFP. This includes a series of designer changes. A recent report by strategy consulting firm Kearney notes that 2025 “saw three times as many changes in artistic directors as in previous years (...), a concrete and strong signal of a luxury industry in search of its new codes”.

Matthieu Blazy has joined Chanel, Jonathan Anderson has arrived at Dior men (LVMH group) and Demna Gvasalia at Gucci. “2026 will therefore be a year filled with high hopes in this regard, and the impact of the newcomers will certainly be closely scrutinised,” comments Kearney.

Company leadership has also seen changes. The most notable case is that of Luca de Meo, the former head of Renault, who was appointed chief executive officer of Kering last year to turn things around.

The previous year, Joshua Schulman, former head of American brands Michael Kors and Coach, had taken the reins at Burberry. The houses have also adapted their offerings. “One approach has been to create smaller products to offer prices that are once again compatible with the expectations of the aspirational clientele,” highlights Christophe Caïs.

“There is this idea that for two or three years, there was no reason to go into luxury boutiques because they had become too expensive and boring,” adds an industry analyst. “Now it is cheaper and more interesting. Therefore, people are starting to walk through the door again.”

This article was translated to English using an AI tool.

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