Recovery in the luxury sector is slower than hoped.
“Chinese demand has continued to improve, albeit incrementally and less than the market would have liked,” says Bernstein luxury goods analyst Luca Solca. “Companies working hard to turn things around are still far from being out of the woods, even if investors want to believe in them — the reaction to Kering’s results is a case in point.”
Solca is referring to the 11% surge of the Kering share on February 10, due to a combination of better results than feared (sales were down 3% vs expectations of -5%), sequential improvement, and positive guidance from the management. “These results mark the bottom and first steps of the turnaround we have initiated,” Kering CEO Luca de Meo told analysts.
Meanwhile, LVMH stock was down as much as 8% after it posted group sales up 1% (including a 3% decrease at its fashion and leather goods division) in Q4, while chair and CEO Bernard Arnault expressed cautious outlook. “2026 won’t be simple,” he said.
The past two years have been challenging, with the impact of the Chinese real estate crisis and the cooling after the post-pandemic luxury boom. “We may be getting out of it. The path looks like a U-shaped recovery that will require a little patience,” Solca adds.
All in all, the luxury sector grew 2.2% in Q4, in line with expectations, after a 2.5% growth in Q3, according to Kepler Cheuvreux estimates. As for the start of 2026, companies noted the unfavorable timing of Chinese New Year — which fell three weeks later than last year — resulting in a lack of clarity about early performance in China, as well as the negative currency impact of a strong euro. (When the euro strengthens, luxury goods produced in Europe cost more in dollars or yuan.)
Here are the key takeaways from luxury’s Q4 earnings.
Stabilization in China, small dip in the US
Although China showed signs of improvement in the third quarter, Q4 did not show any further acceleration.
In China, Hermès has continued to scale during the luxury downturn, unlike many of its peers. “In China, we’re seeing growth: leather goods are performing very well, they’re playing their role as a pillar, while the two other business lines doing best are women’s ready-to-wear and jewelry,” executive chair Axel Dumas told analysts. The strength of the higher-priced categories such as leather goods suggests that high-net-worth clientele in China continue to demonstrate solid spending power, Morgan Stanley analysts noted.
As China has lagged, the US has offered healthier soil for luxury brands to grow. Will that last? LVMH CFO Cécile Cabanis flagged a “slight slowdown” with the American consumers in Q4 versus Q3, attributing it to a “complicated” comparison base. Due to the post-election shopping frenzy that played out in the US in Q4 2024, comparisons were more challenging.
LVMH sales were up 1% in the US in Q4, after 3% growth in Q3. Kering sales were up 2% in Q4, off the back of 3% growth in Q3. Hermès logged double-digit growth in the Americas, up 12.1% in Q4, following a 14.1% sales rise for Q3.
US brands performed well, particularly Ralph Lauren, which posted sales up 10% to $2.4 billion in the third quarter of 2026, and Tapestry, whose sales were up 14% turbocharged by Coach (up 25%).
In the US, luxury brands are flexing their retail muscles. Dior opened a Rodeo Drive store in LA with a restaurant by three-Michelin-star chef Dominique Crenn in the fall. Moncler opened a second store dedicated to Moncler Grenoble in Aspen, after launching its first dedicated store in Saint Moritz in December 2023, and will open a Fifth Avenue flagship in New York this year. Hermès confirmed plans to open a bigger flagship on Rodeo Drive.
The luxury brand’s dedicated ski collection hosted a big show and party on Saturday in the Colorado ski town to celebrate its newest store opening. It underscores a serious investment in the US market.
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“Our Rodeo Drive store is becoming too small,” Dumas said. “So we’ve made a significant purchase for the future that will eventually allow us to have a project we consider fantastic. We currently have tenants, so whether Rodeo Drive will be a project for the seventh generation or for us — we’ll see — but the idea is to think long term. We don’t necessarily want to have more stores, but to have better ones.”
Come May, a number of luxury houses are staging their resort 2027 shows Stateside.
“One thing to keep an eye on is the stock market,” said Kering’s de Meo. “A lot of Americans have savings held in stocks. So if the market holds up well, it will keep driving growth in our sector. If there’s a crash — say an AI bubble — we’ll talk again. But for now, it’s looking good.”
The gap begins to narrow
“The K-shaped economy — where the top end of the economy grows, but the lower end lags as inequalities widen — is still a theme in Q4,” Morgan Stanley managing director Édouard Aubin said in January, before the earnings season commenced. “Because of the large wealth effect, the brands positioned at the top of the luxury pyramid are outperforming, but I think that the gap will narrow slightly.”
It has indeed narrowed. “The fourth quarter has continued to provide highly polarized results, but the distance in organic growth performance has narrowed to 24% points,” Solca says. He notes that the gap was 38% points a year earlier. (In Q4 2024, Richemont’s jewelry maisons were up 14% and Gucci was down 24%).
High-end brands such as Hermès, Loro Piana, Brunello Cucinelli and Cartier are still defying the odds, buoyed by the resilience of ultra-wealthy consumers. “At Loro Piana, we have only one problem: slowing down growth,” Arnault said. But labels with middle-income customers are seeing some early signs of recovery.
“The likes of Burberry, Gucci, and Ferragamo are gaining momentum,” says Charles-Louis Scotti, head of luxury goods equity research at Kepler Cheuvreux. Burberry’s comparable retail sales grew 3% to £665 million in the third quarter of fiscal 2026 (ended December 27, 2025). After a sluggish 2025, Ferragamo saw an improvement in Q4 when sales were down 2% to €282 million, including a 6.3% rise in the direct-to-consumer (DTC) channel.
Jewelry continues to shine, as expected
At LVMH’s watches and jewelry division, sales were up 8%, while sales at Hermès’s “other sectors”, which includes jewelry, were up 12.9%. Sales at the Richemont jewelry maisons, including Cartier and Van Cleef Arpels, were up 14% in the quarter, exceeding expectations. Despite the beat, the Richemont share slipped after the publication of the earnings, as investors saw jewelry strength as a given. Kering doesn’t break down the growth rate of its jewelry brands, but said its respective business generated an approximate €1 billion in 2025. To reinforce its industrial capabilities in the category, Kering acquired jewelry manufacturer Raselli Franco in December 2025. De Meo sees big potential as he seeks to reduce the group’s dependence on the fashion cycle.
“A low-hanging fruit is the business we could do with our fashion brands in that category, from custom jewelry to high jewelry,” de Meo told reporters. “Think about Gucci, for example. Ten years ago, Gucci was doing three times the business that it’s doing right now in that category. So if you have an engine underneath that can help you develop the right product and right collection, this is a no-brainer, right?”
One of the reasons is that high-net-worth individuals are less sensitive to economic downturns, and even as the price of gold has risen, sales have remained strong thanks to the perception of gold as a worthwhile investment.
Holding off on price increases
When it comes to price hikes, Hermès increased prices by around 5% to 6% globally in January 2026, following 6% to 7% hikes last year. Hermès, unlike its peers, did not increase prices after the pandemic, and therefore has more pricing power. Other brands have kept prices steady off the back of past hikes.
“Except in jewelry, where price hikes were meant to offset rising gold costs, overall price increases have been limited,” says Kepler Chevreux’s Scotti. “Luxury brands have only raised prices by low-single-digit percentages to keep up with inflation. Since there is a volume problem, enhancing perceived value will be necessary before any further price increases.”
Bullish on Dior
Arnault noted that Dior, under new creative director Jonathan Anderson, was “off to a good start”. The first creations of Anderson for Dior arrived in stores on January 2.
With Dior being the group’s second largest fashion and leather goods brand, after Louis Vuitton, this came as a relief. This positivity is very much welcome after the house registered a high-single-digit decline, per HSBC estimates, in 2025. (LVMH’s Cabanis confirmed Dior grew “slightly below” the division average of -5% last year).
Analysts are bullish on Dior.
“We are particularly enthusiastic about the comeback of Dior this year after a rough patch in 2024 and 2025,” HSBC analysts wrote in a note. “The brand, alongside Kering’s Gucci, Chanel, and Burberry, was somewhat of a poster child in terms of ‘greedflation’ — prices going too high, too quickly — as well as a lack of creativity. With several management shifts and a new star designer — Jonathan Anderson — incentivizing consumers to push the door again for the first time in a while, we expect a thorough reboot to translate into strong sales growth.”
HSBC expects Dior to turn positive in the first quarter, before gradually accelerating as the year progresses. It anticipates Dior sales to grow 10% in 2026.
