More stability instead of crisis: luxury industry stays on track in 2026

The latest report ‘2026 Global Luxury Industry Outlook’ from US consultancy Kearney suggests that the global luxury sector is entering a period of stabilization rather than decline. Brands are responding to slower growth, changing consumer expectations and ongoing economic uncertainty.

The consulting firm predicts growth in the luxury market of two to four percent in 2026. This is below industry estimates of three to five percent. Performance is expected to vary significantly by region, product category and consumer group. According to the report, 2025 was a “year of realignment” for the industry. It followed a period of aggressive price increases, operational restructuring and creative shifts at major luxury houses.

Kearney explained that the luxury market is “normalizing, not structurally declining.” Brands are now focusing less on size and speed and more on “creative clarity and customer loyalty”.

Fragmentation of global market growth

The US, Europe and China have been named as key regions for sustaining global luxury demand in 2026. They continue to offer the “size, infrastructure and customer density that anchor global luxury demand.” However, Kearney noted that every market performs differently.

In Europe, for example, growth is expected to remain fragile. Brands are struggling with rising retail rents, regulatory pressure and restrained consumer spending. The report says that emerging consumers are increasingly delaying purchases or opting for cheaper alternatives, while high-net-worth customers remain active.

In China, the market has stabilized after volatility in 2024, the company said. However, it is unlikely to return to the double-digit growth of previous years. Spending remains focused on wealthier consumers, while experiential categories and jewelry continue to perform strongly.

Meanwhile, the U.S. market continues to be influenced by what Kearney calls “K-shaped dynamics.” Wealthy consumers continue to spend money, while aspiring buyers become more selective. The report finds that consumers of all income groups are increasingly sensitive to an imbalance between price and quality.

In addition to the three largest luxury regions, Kearney highlighted Japan, Southeast Asia and the Middle East as markets expected to outperform in 2026. In Japan, growth is more closely linked to tourism, hospitality and premium retail experiences. In Southeast Asia, demand is increasing from younger, affluent consumers entering the luxury market for the first time.

Jewelry and experiential luxury are expected to be the strongest performers

Across all categories, the report named jewelry and experiential luxury as the strongest performers. Jewelery was described as “structurally stronger” than leather goods and ready-to-wear. It benefits from longevity and perception of value. Brands are expected to have achieved growth of between six and 14 percent in 2025.

Handbags also proved to be a strong category. Prices have risen by up to ten percent in recent cycles, outpacing clothing and footwear prices, which fell by five to seven percent.

Experiential luxury also continued to accelerate, particularly in the hospitality, dining and wellness sectors. Consumers should increasingly prioritize purchases that feel “emotionally resonant” or “investment-worthy.” At the same time, brands are expanding their offerings to include lifestyle experiences that go beyond just products.

For the future, growth of around eight percent compound annual growth rate (CAGR) is forecast for hotels and upscale restaurants until 2028. Jewelry is expected to follow close behind at around seven percent CAGR. This is in contrast to ready-to-wear and leather goods, which are forecast to see low single-digit growth.

The report also linked the ongoing luxury realignment to sweeping changes in the industry’s creative leadership. According to Kearney, luxury brands saw “three times as many creative director changes in 2025 as in previous years.” Houses such as French fashion house Chanel, Italian fashion house Gucci and French fashion house Dior sought to “reinvigorate brand narratives and product direction.”

Luxury consumers account for almost half of total industry spending

Consumer behavior is another area that is constantly changing. Kearney found that the top two percent of luxury consumers now account for nearly half of total industry spending. At the same time, emerging consumers are becoming increasingly selective about when and where they interact with luxury brands.

According to a consumer survey, 73 percent of respondents said price increases had caused them to reduce their luxury spending. 36 percent said they shopped less often or were less enthusiastic about luxury overall. 63 percent still defined luxury primarily in terms of quality and craftsmanship.

Conflicting behaviors were also found between product- and experience-oriented luxury consumers. The former tend to reduce purchase frequency or turn to resale and second-hand platforms. The latter were more likely to switch between luxury brands or switch to cheaper products within categories in order to continue to participate.

Artificial intelligence (AI) was another focus of the report. Kearney described the technology as part of the “core element of the luxury goods infrastructure,” integrated into forecasting, design, supply chains, customer service and personalization.

According to the report, 90 percent of luxury fashion executives believe AI-driven personalization will become essential for brands. 60 percent of consumers are expected to use AI shopping assistants by 2026. Kearney added that competitive advantage would shift to brands that “industrialize AI behind the scenes while keeping creative decisions in the hands of humans.”

Summing up the year ahead, Kearney stated, “2026 will reward not size or speed alone – but clarity, discipline and relevance sustained over time.”