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The worst appears to be over. After a rough patch in the third quarter, when consumer confidence in China hit an all-time low and Chinese purchases in Japan dropped, luxury showed signs of improvement in the fourth quarter of the fiscal year.
“The results on the whole were above expectations. All in all, the fourth quarter was a bit of a sigh of relief for investors — hence the positive share price moves,” Bernstein luxury goods analyst Luca Solca says. He points to LVMH’s fashion and leather goods division as the sector’s proxy: down 1 per cent in the quarter versus a negative 3 per cent forecast.
“While the trajectory is the same, companies are travelling in this trajectory at very different altitudes,” Solca says. “Those who command high desirability are well in the mid to high teens organic growth — those trailing are still negative in the double digits.”
Results were a mixed bag. “There are massive winners and massive losers,” says HSBC managing director of consumer and retail equity research Erwan Rambourg. Hermès continued to shine with sales up 18 per cent. Richemont’s jewellery maisons, which includes Cartier and Van Cleef Arpels, smashed expectations to reach 14 per cent growth. Meanwhile, Gucci continued to struggle, reporting a 24 per cent drop. Moncler sales were up 8 per cent. Spanish beauty and fashion conglomerate Puig reported sales up 14.1 per cent. Prada brand and Miu Miu retail sales were up 4 and 84 per cent, respectively, in the quarter.
On average, luxury companies reported sales up 2 per cent in Q4, compared with a 2 per cent decrease in the third quarter, according to Kepler Cheuvreux’s calculations, which take into account company size. Kepler Cheuvreux analyst Charles-Louis Scotti stressed that we’ve hit “the end of the downward spiral in China”. That’s led by Moncler, which grew double digits in the market in Q4. For 2025, Kepler Cheuvreux predicts luxury companies will grow by around 5 per cent, below the compound annual growth rate of 8 per cent between 2012 and 2019.
Here are the key takeaways from the fiscal year’s fourth quarter luxury earnings so far.
1. The return of the aspirational customer
Following the post-pandemic euphoria, middle-class shoppers began to cut back on spending as the first to be impacted by the rising cost of living. Instead, luxury brands turned to ultra-high-net-worth individuals drawn to the quiet luxury aesthetic. After months of obsession with “stealth wealth”, aspirational customers are back.
That’s good news for luxury. The loss of the aspirational customer was a key reason for the slowdown, as prices rose and entry-level spending shrunk. Now, as consumer confidence rises, brands are ensuring they capture that customer.
Kering president and CEO François-Henri Pinault stressed the importance of aspirational customers during the group’s press conference, where he clarified that its strategy of elevation doesn’t mean leaving the entry-level segment. “It’s a matter of remaining very strong in the aspirational clientele segment that responds to the creative, fashionable side of our houses, and of adding to them the more sophisticated, more mature segments of the industry,” he said.
“This is triggered by demand, but also by offer,” notes Rambourg, citing the re-edition of the Louis Vuitton x Murakami bag, which is a sell-out (the second chapter of the re-edition arrives in stores on 21 March). “We’re in a new phase where you are reconnecting with an aspirational consumer. You’re introducing better priced products that are fun, quirky, colourful, targeting a younger aspirational consumer who’s been priced out,” the analyst explains.
Rambourg also cites the successful launch of Dior’s D-Journey bag, a cross-body, soft leather style that contrasts with the construction of the Lady Dior bag, at a lower price point (€3,500 for a medium D-Journey on the Dior website).
2. The US is back, but tides may soon turn
LVMH chairman and CEO Bernard Arnault spoke about “a wind of optimism in the US” during the conglomerate’s annual earnings presentation at the end of January. It’s not only because of uncertainties being removed after the election.
“We think that there is some duration. There is a lot of investment going on in the US, on social media, on traditional media, on store refurbishments, on mega-projects,” Rambourg says. Moncler is opening a 2,000-square-metre store on New York’s Fifth Avenue in early 2026. Louis Vuitton opened a temporary NYC store late 2024, which Arnault called “an outstanding success” with “100-metre long lines”. Dior will reopen its Madison Avenue flagship in June, following an expansion, and plans to open a new outpost later this year on Los Angeles’s Rodeo Drive. “The US will be a strong [customer] recruiting ground for the next 24 months,” Rambourg says.
The US is an all-important market for luxury. But that confidence may be starting to slip, as inflation spikes and President Trump’s tariffs come into play, raising uncertainties that some had expected the election to quell. Consumer confidence declined by seven points to 98.3 on The Conference Board’s Consumer Confidence Index, the organisation reported ahead of the tariffs taking effect, marking the largest monthly decline since August 2021. “Recent weak consumer sentiment data points to a softening consumer worried about inflation,” Bea Chiem, retail and consumer managing director at finance intelligence firm S&P, told Vogue Business at the time.
Last week, Bloomberg reported that the richest 10 per cent of American households account for half of all US consumer spending. That the habits of these high earners are increasingly stratified from average Americans is concerning for brands banking on acquiring new customers, especially as these high spenders age out.
Walmart and Target — two bellwether retailers for the US consumer temperature — flagged concerns about growth for the year ahead. Walmart posited 5 per cent growth; but shares dropped as the retailer announced profit growth will slow the coming fiscal year. Target said the same, flagging imminent price increases due to Trump’s tariffs.
3. A wait-and-see attitude on tariffs
As of when the earnings calls took place, luxury executives said their concerns on tariffs were minimal and that they are in no hurry to import handbags and perfume in case duties on luxury goods are imposed by the Trump administration. “They’re relaxed for several reasons,” says Rambourg. “One, you don’t have a lot of local American substitutes for their products. Secondly, you don’t know what you don’t know. You’re not going to load up your inventories on Dior or on Rimowa. You’ll just wait to see if there’s something to negotiate and be very pragmatic about it.”
“Overreacting has its own cost,” Anish Melwani, chairman and CEO of LVMH North America, told Vogue Business in January. He explained that it would mean diverting from other markets and paying for storage.
The tariffs situation has evolved since then, with a global trade war brewing by the beginning of March. On 4 March, Trump enacted 25 per cent tariffs on Canada and Mexico and raised tariffs on China to 20 per cent. Retaliatory tariffs were promised. It’s not clear how long they’ll last, but what is becoming clear is that Trump was not bluffing. One goal of the taxes is to bring production back to American shores.
LVMH already has 14 factories in the US, including three for Louis Vuitton. “Already 35 per cent of what is sold (in value) in terms of leather goods in the US from Louis Vuitton is made in the US and it’s almost becoming a marketing argument: ‘Made in the US’. Your wallet will be made in the US and it’s written on it and it’s fine,” Rambourg says. LVMH is considering further investment in production capacity in the US by 2027, a LVMH spokesman confirmed to Vogue Business.
Kering is taking a different approach. Pinault dismissed moving production to the US. “ We are producing in Italy and in France, and this is part of the promise that we bring to the consumer through our product, through our heritage. So we have no plan of producing in the US to counter the tariff. It makes no sense.”
4. ‘Greedflation’ is over
Last year, HSBC’s Rambourg described ‘greedflation’ as “the idea that many brands went too high, too quickly in terms of price point”. Brands are now more cautious with their price hikes.
When an analyst asked Arnault to comment on pricing architecture, in light of the debate in the industry about pricing having gone too far, he responded: “Price, you have to be very careful indeed. Customers are increasingly aware of the value of the product beyond the price. Increasing prices is something that is properly understood by clients. The problem is when you increase your prices for no good reason. You have to be able to justify a price hike, better quality, better finish, different materials used. And it is true that a number of houses have unfortunately increased their prices in a somewhat extravagant manner without really giving any justification or having any justification to provide.”
However, Hermès and Moncler have announced plans to pass down increases, raising prices by 6 to 7 per cent and mid-single digit, respectively. Having been more reasonable than peers in previous years, Hermès is playing catch-up. Across the board, Kepler Cheuvreux anticipates average price increases of 3.5 per cent in 2025, after a 4 to 4.5 per cent increase in 2024; below the compound annual growth rate of between 7 and 8 per cent since December 2019.
5. A Nike Swoosh-shaped recovery
Overall, luxury is headed for a very gradual recovery.
“It’s slightly picking up so it’s a mix between an L-shaped recovery [low values for a long period after a sharp fall] and a Nike Swoosh-shaped one. We’re certainly not factoring a big rebound,” says Rambourg. “We think that gradually the confidence in China will still be poor, but less so,” he says. HSBC estimates flat growth in China this year, with a negative first half and a positive second half, which implies every quarter being better than the previous one.
Hermès executive chairman Axel Dumas said: “I see positive signs. Does this mean that structurally it has started again? It is too early to draw conclusions.”
Rambourg concludes: “We moved from being very cautious on the sector a year ago to being very constructive now.”
With additional reporting by Madeleine Schulz.
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