After two years of sluggish demand, the luxury market will return to growth in 2026, up between 3% and 5%, according to the latest report from management consultancy Bain, in partnership with Italian luxury goods association Altagamma.
The organizations expect 2025 spending to close broadly flat at €1.44 trillion (between -1% and 1% growth). The personal luxury goods market is expected to reach €358 billion by the end of the year, compared to €364 billion last year and €369 billion in 2023 — a 2% year-on-year decline at current exchange rates, and flat at constant rates.
It’s a promising light at the end of the tunnel after a prolonged slump for luxury. In 2024, the market contracted for the first time (excluding Covid) since the great recession. The market shrunk by 2%, and luxury lost 50 million customers in the process. In June, Bain said the outlook for 2025 was clouded by tariffs and had outlined three possible scenarios for performance. Now, Bain is forecasting the best scenario, with better-than-expected performance in the US more than compensating for softer-than-expected results in Europe. Bain confirmed that over the next 10 years, the personal luxury goods market is likely to grow between 4% and 6% per year, reaching between €525 billion and €625 billion, while overall luxury spending could span €2.2 trillion to €2.7 trillion.
“It’s good news that, given the global uncertainties — turmoil, tariffs, geopolitical instability, wars, the macroeconomic environment and consumer confidence — this market is stable. This is a positive message, because it seems that customers have an appetite for luxury,” says Federica Levato, partner at Bain, who co-authored the report.
By market, the Middle East and rest of world category performed the best, up between 4% and 6% this year driven by tourist flows and local demand. The Americas remained relatively stable, with volatility in the first half but recovery in the second, thanks to the stock market recovery and confidence among high-earning consumers. Europe suffered due to a lack of tourists, as did Japan; Mainland China is still down, but has started showing some signs of stabilization as of Q3. As a whole, this amounted to a more stable global luxury market.
Despite the improvements, brands are still failing to provide sufficient value. Luxury’s new customer acquisition has declined 5% in the past year, and the market is currently serving less than half — between 40% and 45% — of its addressable consumers (in 2022, the figure was around 60%). “The gap is widening, and this is a worrying message for the market,” says Levato. “Even the very wealthy customers are feeling betrayed by the continued elevation, so they are directing their spending to other categories — travel, experiences, or value-for-money brands.”
By segment, accessible luxury (brands like Coach and Ralph Lauren) is performing the best, with 50% of brands growing. “The accessible luxury segment is recruiting new customers while reactivating historical ones,” says Levato. In contrast, 35% of “absolute” luxury (the likes of Hermès and Loro Piana) are growing, and only 25% of what Bain defines as aspirational luxury (Gucci, Louis Vuitton — classic luxury brands that serve a broad range of customers) are growing.
Against a backdrop of US tariffs, luxury brands have increased their prices. But Levato says it’s not the incremental price increases that are the problem, it’s the lack of entry-level offerings. “There is now a new wave of creative directors that have reignited interest in these brands and the industry, but there needs to be more ethics in how brands price products to convert that interest into sales, love and advocacy for these brands,” says Levato.
The jewelry market outperformed this year, partly because jewelry brands have not raised their prices significantly despite the rising price of gold, and even when they have increased prices, they have justified them logically. “You find many jewelry pieces at €1,000, but not many bags or shoes,” Levato says.
Despite the price increases, luxury still has a profitability issue. With operating costs rising, EBITDA margins for personal luxury goods brands are around 15% to 16%, which is the same level as in 2009 (its peak was in 2012, at 23%). Levato says most of these costs are fixed, so the focus should be on reigniting the top line.
By failing to address value perception, brands are missing a key opportunity — especially given that customers are beginning to buy luxury earlier, while living longer, Levato notes. “Luxury brands are not delivering the value that customers are expecting,” she says. “Our call to action is to re-establish what we call ethics [in pricing] and a reconnection with the customers this industry has lost to elevation.”
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