The global luxury market is undergoing a significant recalibration in 2025, marking a notable shift from the decade of robust expansion that preceded it. Major industry players, including LVMH and Kering, are reporting downturns in revenue and profitability, signaling a change in consumer sentiment and economic pressures.
LVMH, the conglomerate behind brands such as Louis Vuitton and Dior, experienced a 4% decrease in revenue for the first half of 2025, totaling 39.8 billion euros. This was accompanied by a 22% drop in net profit and a 15% decrease in recurring operating profit. The fashion and leather goods division, a significant contributor to LVMH's revenue, saw an 8% decline.
Similarly, Kering, the parent company of Gucci and Yves Saint Laurent, reported a 14% revenue decrease in the first quarter of 2025, amounting to 3.9 billion euros. Gucci, in particular, experienced a substantial 25% drop in sales on a comparable basis.
Several factors are contributing to this industry-wide slowdown. Rising prices have begun to deter consumers, leading brands to increasingly utilize outlet stores for inventory management. There is also a growing concern that some brands may be losing their exclusive status, becoming more akin to mass-market entities rather than symbols of refined luxury. This downturn is being compared to the challenges faced during the 2008 financial crisis, with projections indicating a 2-5% decline in global luxury sales for the year.
The Chinese market, a critical engine for luxury growth, is also undergoing a transformation. While 75% of luxury purchases are expected to be domestic, brands are recognizing the need to cultivate loyalty among existing customers and offer highly personalized experiences to justify price increases through inherent quality. The focus is shifting towards building authentic connections with younger demographics, diversifying communication channels, and moving away from an over-reliance on a few high-spending individuals, emphasizing instead the fostering of long-term loyalty rooted in shared values and meaningful experiences.
By 2025, Millennials and Gen Z are projected to account for a significant portion of luxury spending. This demographic prioritizes authenticity, sustainability, and digital integration, demanding more than just the prestige of ownership. Brands are responding by embracing transparency in their supply chains, incorporating sustainable materials, and engaging consumers through digital platforms and immersive experiences. The appeal of collaborations, both with influencers and other brands, is also on the rise, creating buzz and extending reach to new audiences.
The luxury sector is at a crossroads, requiring a strategic pivot towards deeper customer engagement, a renewed focus on intrinsic brand value, and an understanding of the evolving expectations of a new generation of consumers. The path forward involves not just adapting to market shifts but proactively shaping a more meaningful and enduring connection with clientele.