After a sluggish first half of the year, the luxury sector returned to modest growth in Q3, buoyed by the US stock market and a stabilization in China. But we’re not out of the woods yet. “It’s more a stabilization, at least in Asia, than things fundamentally getting much better,” Morgan Stanley managing director Édouard Aubin tells Vogue Business.
Still, LVMH — the bellwether for the sector — saw the biggest one-day share price move in over 30 years, after reporting better-than-expected sales (group sales were up 1% to €18.28 billion, versus consensus expectations of -0.6%). The share price was up 12% on October 15. Kering and Ferragamo, which also both beat consensus expectations, joined LVMH in a strong rally. “There has been a lot of concern and skepticism over the sector for the past 12 months-plus. Now, there is less negativity,” Aubin says.
Here are the key takeaways from luxury’s Q3 earnings.
Encouraging signs in China
The US market has driven luxury’s growth in Q3, with trade tensions easing and equities at record levels. However, performance in China was mixed. “The massive wealth effect [people spending more as they feel richer due to changes in their assets’ value] is helping the US a bit, but the US consumer is about 22% of total spend in luxury. So from an investor point of view, for the sector to work in the stock market, you need to believe that demand from China will pick up in a reasonable timeframe, and I don’t think anybody has a strong conviction on that yet,” says Aubin.
Two perspectives emerged: mere stabilization in China, or real improvement. Prada aligns with the former. “We have seen a kind of plateau in China,” Prada Group CEO Andrea Guerra said during the company’s earnings call. “[Summer] holidays were better than what we expected, but I would keep the word ‘plateau’.”
Despite continued difficulties in China’s housing sector, others highlighted signs of improvement, supported by gains in the stock market. Asked about the Chinese cluster (meaning local consumers shopping at home and abroad), LVMH CFO Cécile Cabanis said: “We are low-single-digit negative, but improving a lot on the whole cluster. And this is done through two things: first, Chinese locally are now growing mid to high-single digits; second, the Chinese tourist part of the purchases is improving a lot but still in double-digit decline.”
Hermès executive VP of finance Éric du Halgouët noted “a very slight improvement” in China. He said: “There are still two encouraging signs, more related to macroeconomics. First, there is a stabilization of the real estate sector in major Tier 1 cities in China. The second, potentially positive element, is the recovery of financial markets, both in Mainland China and Hong Kong. Lastly, during the first week of October, which was Golden Week in Mainland China, we saw more dynamic activity. While we can’t extrapolate this to the whole quarter, it remains an encouraging sign for Greater China.”
The two growth drivers in Q3 were the US and Asia. In Europe, Q3 is typically a significant quarter as it reveals a lot about tourism flows, but this year, the weaker dollar kept Americans from heading to Europe for their summer vacations. LVMH sales were down 2% in the region, a weaker-than-expected performance. Moncler also missed expectations in the EMEA (Europe, the Middle East and Africa) region. “It normally depends largely on tourists buying fall/winter products ahead of the season while visiting Europe. This year, [tourism was] not a great support, given the weaker dollar and the continuing lackluster Chinese overseas spend,” wrote Bernstein luxury goods analyst Luca Solca.
Meanwhile, Hermès said that a brief dip in tourism from the Middle East was observed in the third quarter, during heightened tensions between Israel and Qatar, though levels have since normalized.
Aspirational consumers aren’t back, yet
After decades of expansion fueled by the middle class, the sector now depends on high-net-worth consumers. Aspirational customers were priced out due to the sharp price increases and reduced discretionary spending. “Investors are still a bit concerned that it will take time for the sector to once again start to recruit from the middle class,” Aubin says.
There are positive signs. Asked during the earnings call if aspirational consumers are coming back, Kering chief financial officer Armelle Poulou noted “still a good resilience from the high-end customer, but also maybe some good performance on e-commerce that is generally a channel where we see more aspirational customers”.
Gucci saw the strongest magnitude of rebound, with sales down 14% in Q3 after a 25% drop in H1. With Gucci being more exposed to the aspirational clientele than other luxury houses, this could signal the return of this kind of customer in the US. It could also be thanks to the house’s own actions: Gucci introduced lower priced products like the Giglio tote bag.
Anne-Laure Bismuth, equity research analyst at HSBC, explains: “Gucci benefited from new products that came before creative director Demna’s start at the house. On top of that, Demna’s own products will be coming out over the course of next year. They’ve also reworked their pricing architecture, which will help them reconnect with the aspirational consumer.”
In the Hermès Q2 earnings call, executive chairman Axel Dumas noted that “the traffic-driven clientele that starts with silk, belts and perfumes is slightly smaller”. But in Q3, the lower value divisions (other than leather goods or jewelry) grew above consensus expectations: ready-to-wear (6.6% vs 5.9%), silks and textiles (4.1% vs 2.8%), perfumes (-7.2% vs -9.1%), watches (8.8% vs 0.8%). “The beat on more volume-exposed divisions is encouraging given worries about Hermès’s ability to sustain high growth even as overflow leather goods demand normalizes,” Solca wrote in a note. “It also highlights a key avenue for Hermès to participate in any recovery in aspirational luxury demand.”
Still, by category, “jewelry remains the star of the sector — showing double-digit growth at Hermès and Kering, and mid-single-digit at LVMH”, notes Charles-Louis Scotti, head of luxury goods equity research at Kepler Cheuvreux. One of the reasons is that high-net-worth individuals (HNWIs) are less sensitive to economic downturns. Richemont is to publish its earnings on November 14. Sales at its jewellery maisons, which include Cartier and Van Cleef Arpels, are expected to be up 12.8% in the quarter, according to HSBC estimates. HSBC analysts cite the attractiveness of the category as well as product newness, notably Love Unlimited, Cartier’s new flexible bracelet launched at the end of September, which could help boost Q4 performance.
Pinning hopes on the creative reset
The fourth quarter is expected to soften, as year-on-year comparisons prove tougher after last year’s post-election US bump. Sales at LVMH’s fashion and leather goods division are expected to be down 4.7% in the fourth quarter, per the Visible Alpha consensus. “Q4 is going to be tougher when it comes to comparison base, and we need to keep that in mind,” said LVMH’s Cabanis. “When we turn to next year, we will have easier comparison bases and we are solidly building self-help. So all in all, we are confident while we remain conscious of the macroenvironment, which is still challenging and continues to be pretty volatile.”
The creative reshuffle had little to no effect on Q3, but it could clearly have a significant commercial impact when new products hit stores. The LVMH Q3 earnings call provided some details on the timing of the collections’ arrival in stores. “ The timing of each one is very different,” Cabanis said. Michael Rider’s debut collection at Celine will hit stores in November, with new bags already on shelves, she said. At Dior, Jonathan Anderson’s first men’s collection will start to land in January. “Then, it’ll be gradual with some capsules for women, but probably more towards Q2 than Q1.” Cabanis added: “The way you need to look at it is really around gradual and sequential improvement rather than a giant difference.” Meanwhile, Maria Grazia Chiuri is expected to present her debut collection as Fendi’s new chief creative officer in February.
HSBC estimates that sales of LVMH’s fashion and leather goods will grow 4.5% in 2026. “ The underlying trends of the luxury industry will get better. There’s also all these new products coming in, with a major expected inflection point at Dior. There’s great enthusiasm for the arrival of Jonathan Anderson’s products,” HSBC’s Bismuth says.
HSBC also estimates Gucci will grow 10% on an easy comparison basis, Saint Laurent 6%, Bottega Veneta 7%, and Kering’s other brands division, including Balenciaga and McQueen, by 5%.
The market will be more competitive for a fashion-forward brand like Miu Miu, which has begun decelerating following a hot streak (up 29% in Q3 vs 105% in Q3 2024). Prada Group’s Guerra said during the call: “I think in the next three to six months, we will observe in our industry a lot of novelties, with all these new entries and products.” The Prada brand and Miu Miu are expected to grow 5% and 17%, respectively, in 2026, according to HSBC estimates.
As HSBC managing director Erwan Rambourg puts it: “Brands are introducing new and creative products at a more palatable price point. You have a wave coming to you.”
