Will the luxury market return to growth in 2026?

The luxury sector has slowed significantly in the last two to three years. The reasons for this were price increases, a lack of creativity and a downturn in China. Despite geopolitical instability, the industry hopes to return to growth in 2026.

The French luxury group and global market leader LVMH will be particularly under observation. He opens the reporting season late on Monday with his sales figures for the first quarter.

The industry had reached highs following the Covid-19 pandemic but faced major challenges in 2024 and 2025. Although not all companies suffered the same fate, consumers generally no longer accepted price increases or stylistic decisions with the same enthusiasm as before.

“The post-Covid effect drove a significant increase in activity, purchases and sales, driven by the return of customers and a kind Revenge spending“, explained Christophe Caïs, head of CXG, a consultancy specializing in the luxury sector.

“However, there were very significant price increases that deterred ambitious customers,” he notes. This group consists of occasional customers who want luxury but do not have the financial resources of high-income buyers.

In a recent report, the bank HSBC even speaks of “self-inflicted wounds” on the part of the companies. She cites a current “lack of creativity” and price increases that have outpaced cost increases.

Difficult conditions are weighing on the luxury sector

Other reasons for the decline include the slowdown in the Chinese market, which has been a key growth driver in recent years. Since the end of February, the war in the Middle East has put additional pressure on the luxury sector. According to a study by Bernstein analysts, the region accounts for around six percent of industry sales. The impact is still difficult to estimate as it will depend on the duration of the conflict.

As for the numbers, French giant LVMH reported a 13 percent drop in net profit to 10.9 billion euros for 2025. Sales fell by five percent to almost 81 billion euros.

The situation was even more difficult for its French competitor Kering. Annual sales fell by 13 percent to 14.7 billion euros. Net profit fell by almost 94 percent, mainly due to difficulties with the main brand Gucci.

On the other side of the English Channel, the British brand Burberry slipped into the red in the 2024/2025 financial year. The brand, famous for its tartan pattern, then announced austerity measures affecting 1,700 jobs.

Numerous luxury fashion houses are bringing in new creative minds

According to specialists interviewed by AFP, the luxury houses have finally reacted. This includes a number of designer changes. A recent report by the strategy consultancy Kearney states that in 2025 there were “three times as many changes in creative directors as in previous years (…). This is a concrete and strong signal of a luxury industry in search of new codes”.

Matthieu Blazy has moved to Chanel, Jonathan Anderson to the LVMH-owned fashion house Dior and Demna Gvasalia to Gucci.

“2026 will therefore be a year full of high hopes. The impact of the new additions will certainly be closely monitored,” comments Kearney.

There were also changes in company management. The most notable case is that of Luca de Meo, the former boss of Renault. He was appointed CEO of Kering last year to turn things around.

The year before, Joshua Schulman took over the management of Burberry. He is the former head of the American brands Michael Kors and Coach.

The fashion houses have also adapted their offers. “One approach was to create smaller products in order to again offer prices that are compatible with the expectations of ambitious customers,” emphasizes Christophe Caïs.

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