Luxury bets on rich Americans and new designers to revive growth

The luxury industry is relying on wealthy US consumers to power a recovery in spending in 2026, as a buoyant stock market and an influx of creative talent at some of the world’s biggest brands set the stage for a return to growth.

Sales are expected to increase by mid single-digit percentages this year after a bruising 2025 in which they are estimated to have flatlined. Analysts at Barclays and HSBC are projecting organic growth of 5 per cent to 6 per cent and 6.5 per cent respectively across the industry. 

As the industry’s reporting season kicks off next week, Barclays analyst Carole Madjo expects the strong performance of the US stock market — the S&P 500 is near a record high — to translate into increased spending on luxury goods this year.

“Luxury companies really feel like there is now a cleaner correlation between wealth effects and luxury spending,” she said, citing a disconnect last year caused partly by the disruptive impact of US President Donald Trump’s tariffs.

That disconnect is now fading and the unpredictable political climate is “having less of an impact on the feelgood factor” among US shoppers, Madjo added.

The Americas was the standout region for Swiss group Richemont in the final quarter of last year. US demand for its Cartier and Van Cleef jewellery brands underpinned a 14 per cent rise in sales in the region, at constant exchange rates, to €1.74 billion (US$2.1 billion; S$2.64 billion).

HSBC estimates that growth in luxury sales to US consumers will accelerate to 8 per cent in 2026, up from 2 per cent last year.

Brands eased off price rises in 2025 after increasing dramatic increases during the industry’s post-pandemic boom. This, combined with new creative talent — such as Jonathan Anderson at Dior and Matthieu Blazy at Chanel — bringing a fresh eye to product lines, is expected to provide a sales boost.

Meanwhile, investors should also see the benefits of cost cutting and portfolio reshaping at major luxury groups. Two such deals were announced this week: LVMH sold its travel retail business in China and Richemont offloaded its watch brand Baume & Mercier.

However, fourth-quarter results season may not provide much evidence of a rebound as companies face tough comparisons against the end of 2024 when there was a fleeting post-election bump in US spending last year.

On Tuesday luxury leader LVMH, which owns Dior, Louis Vuitton and Tiffany, is expected to report almost no organic sales growth in the fourth quarter, according to Visible Alpha consensus estimates. Sales at its bellwether fashion and leather goods division are expected to have fallen by 3.25 per cent.

Industry growth this year will be driven by an increase in the number of products sold as opposed to price increases for the first time in decades, according to HSBC. Consultancy Bain has estimated that prices on most luxury clothing, bags and shoes are 1.5 to 1.7 times more expensive than they were in 2019. 

However, there are still doubts hanging over any rebound. While the Chinese market is expected to stabilise after a dismal two years — sales have fallen every quarter over that period, according to Bain — there is little sign that demand in the country will return to its former heights anytime soon. 

Luxury groups also have a fight on their hands to win back the less affluent customers they alienated with years of aggressive price rises.

Brands are refocusing on the cheaper end of their ranges — products typically priced between €1,000 and €2,000 — to tempt back shoppers who have been priced out. A recent Louis Vuitton campaign focused on its signature monogram bags that start from about €1,500, a rare occurrence for a brand that usually focuses its advertising on splashy new products.

But analysts caution that the US’s increasingly K-shaped’ economy — in which asset-owning households are becoming wealthier and asset-light households are scraping by — could jeopardise efforts to win back luxury’s more “aspirational” consumers.

Despite the uncertainties, Erwan Rambourg, global head of luxury at HSBC, hailed the industry’s return to volume growth as a clear sign of revival.

“What counts will be the reality that consumers finally have a good reason to go back and visit stores,” he said.

By Adrienne Klasa © The Financial Times.

This article originally appeared in The Financial Times.