Luxury sector seeks solutions amid downturn

Is this the dawn of a new era for luxury? Faced with a marked slowdown over the past three years, the sector is trying to regain momentum by returning to fundamentals, streamlining portfolios and exploring new avenues.

Profits are down sharply for LVMH and Kering in 2025, and Burberry reported a net loss for its 2024/2025 financial year. The figures show a change in trend. The causes are numerous, including price increases that have tired customers, questions about product quality and a slowing Chinese market.

“Luxury, coming out of Covid-19, was boosted by revenge buying,” recalls Eric Briones, co-founder of the Paris School of Luxury, who has just published a book on the sector's transformation.

“When luxury was faced with this high demand, the artisanal model was undermined,” he says, citing subcontractor scandals in Italy. The Italian judiciary has been investigating major luxury names for two years over working conditions in sewing workshops, suspected of exploiting Chinese labour.

The demand boom was also accompanied by a price increase of up to 50 percent over three years for some brands, “without an increase in quality, or even with a decrease in quality,” he points out.

Price inflation, but also volume inflation: “There is a fundamental question,” explains Christophe Caïs, head of the luxury consultancy CXG. “How many bags can you sell globally before you become a little too present? We want to be exclusive and at the same time we want to do volume. At what point does this volume effect contradict your desire for exclusivity?”.

According to the consulting firm Bain & Company, the luxury market lost 20 million customers between 2024 and 2025, after having already lost 50 million in previous years.

After years of economic and geographical expansion for major luxury groups that have built themselves up as conglomerates, the time for rationalisation has come, specialists point out.

“There is a phase of refocusing on a form of portfolio coherence. We can decide to move away from or find a better partner for certain brands that are less part of a group's DNA,” analyses Léa Hubsch, a partner at the Kearney firm.

Experiential luxury

The global luxury giant LVMH, for example, recently sold the American brand Marc Jacobs after thirty years under its ownership. In January, it sold its Duty Free Shops (DFS) business in China.

On the side of the French group Kering, which is undergoing a major transformation, moves have also begun, including the sale of its beauty division to L'Oréal for four billion euros.

“This consolidation trend is set to continue, with conglomerates divesting their underperforming or strategically less important divisions to focus on their core businesses,” analyses the firm CXG in a recent report.

Another example is the acquisition of the Italian brand Versace by its competitor Prada for 1.25 billion euros in 2025. Other deals are expected, notably for the Italian house Giorgio Armani. In his will, the designer, who died last year, asked his heirs to sell his empire in the medium term to a luxury giant like LVMH or L'Oréal.

Within companies, rigour is the order of the day. Luca de Meo, the former head of Renault appointed to lead Kering last year, stressed during his strategy presentation in April that excellence must take precedence. This includes a return to fundamentals, store closures and a reduction in the number of product references for certain brands.

More broadly, industry specialists speak of a new luxury, one less focused on ostentatious products and more on the huge, fast-growing wellness market.

“Desire has shifted to the experiential: beauty; hospitality; transformative luxury,” says Eric Briones. Experts see the future particularly in wellness and longevity, with clinics worthy of luxury hotels. This is a sector where Kering has already begun to position itself, through a joint venture with L'Oréal announced a few months ago.

This article was translated to English using an AI tool.

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