The luxury goods market, once a seemingly unstoppable force, is facing a pronounced slowdown. After three years of sluggish performance, investors hoping for a rebound this winter are being met with disappointing results, according to a portfolio manager who spoke with La Tribune. The expectation of a swift recovery appears increasingly unlikely.
The shift marks a significant change from the period between 2021 and 2023, when the industry enjoyed an average annual revenue increase of 11%. Kepler Cheuvreux now forecasts growth of just 6% for the current year, though the firm notes considerable variation in performance across different companies.
The Ultra-Luxury Segment Remains Resilient
While the broader luxury market grapples with headwinds, the ultra-luxury segment continues to demonstrate remarkable resilience. Houses catering to the wealthiest clientele are still reporting record profits. Hermès, despite experiencing a dip in growth to below 10% – a first in recent memory – managed to increase its operating margin to 41%, a remarkably high figure. The company, led by Axel Dumas, benefits from a customer base that, as Émeric Blond of Tailor AM puts it, “continues and will always continue to consume except in the case of a major financial crisis.”
Richemont, another key player in the ultra-luxury space, also delivered a strong performance, driven by robust demand for jewelry from high-net-worth individuals. Lionel Melka of Swann Capital noted the company’s success, with revenues increasing by 11% in 2025. Richemont’s ownership of Cartier proved particularly beneficial.
Broader Economic Headwinds Impact Luxury Demand
The slowdown in the luxury sector mirrors a wider deceleration in the global economy. Recent reports indicate a significant downturn in consumer demand, impacting valuations across the industry. Interbrand reported a 5% drop in the valuations of top luxury brands like Louis Vuitton and Gucci in 2025, a clear indication of shifting market sentiment. This downturn is occurring even as the broader fashion industry experiences similar challenges, as outlined in the State of Fashion 2025 report.
The industry is entering what one analyst describes as “a period of normalization where many luxury groups will probably no longer experience double-digit growth.” This suggests a recalibration of expectations and a move away from the rapid expansion seen in recent years. The McKinsey report highlights that, for the first time since 2016 (excluding 2020), luxury value creation is expected to be lower than the previous year.
India’s Economic Outlook and Potential for Luxury Growth
While headwinds persist in established markets, emerging economies like India present a potential avenue for future growth. Deloitte’s January 2026 economic outlook for India suggests continued, albeit moderated, economic expansion. However, the extent to which this translates into increased luxury spending remains to be seen. The Indian market is still developing, and consumer behavior is subject to unique local factors.
Turbulence as the New Baseline
The current challenges facing the luxury industry are not expected to be short-lived. Bain & Company suggests that turbulence will be the “new baseline” for an extended period, as economic uncertainties and cultural shifts impact demand. Despite these challenges, the firm emphasizes the industry’s underlying resilience and strong fundamentals, suggesting that This proves well-positioned to navigate the current environment.
The slowdown is prompting a reassessment of investment strategies. The portfolio manager quoted by La Tribune exemplifies this shift, admitting to having cooled on the sector after reviewing the latest financial results. The initial anticipation of a rebound has given way to a more cautious outlook, reflecting the broader market sentiment.
The divergence in performance between the ultra-luxury segment and the broader market underscores the importance of catering to the wealthiest consumers. Companies like Hermès and Richemont, with their established brands and loyal clientele, are proving more resilient to economic pressures. However, even these companies are not immune to the challenges, as evidenced by Hermès’ slight dip in growth. The future of the luxury market will likely depend on its ability to adapt to changing consumer preferences and navigate the increasingly complex global economic landscape.
Morgan Stanley’s midyear economic outlook for 2025 further reinforces the narrative of widespread deceleration, suggesting that the challenges facing the luxury sector are part of a broader economic trend. The industry’s ability to maintain its position as a symbol of aspiration and exclusivity will be tested in the coming years.
