Luxury brands are grappling with a significant sales slump, raising concerns over the long-term structural attractiveness of the industry.
What Happened: Last week Kering disclosed a less-than-expected Q2 2025 performance, with a 15% YoY drop in sales to $4.27 billion. This falls short of the €3.96 billion predicted by LSEG analysts.
Gucci, a significant contributor to Kering’s overall revenue, reported a 25% decrease in sales for the quarter, amounting to €1.46 billion.
As per a report by CNBC, François-Henri Pinault, the CEO of the luxury group, acknowledged the disappointing results but expressed optimism about the company’s ongoing efforts to enhance its performance.
Despite the challenging economic and geopolitical landscape, Kering remains committed to executing its strategy for profitable long-term growth. Sales were weaker across all markets, with Japan and the Asia Pacific region leading the decline.
Bernard Arnault, owner of Louis Vuitton and over 70 other luxury brands, remains optimistic, despite a 20% drop in LVMH MC’s stock this year.
According to The Wall Street Journal, Arnault has invested over $1 billion in the company’s shares since January. However, investors are growing concerned. LVMH reported disappointing results last week, with a 9% drop in sales from its fashion and leather goods division in the second quarter.
The company attributed this to weak demand for brands like Louis Vuitton and Christian Dior due to reduced tourist spending.
Also Read: Prada, Gucci, Louis Vuitton Brace For Sales Slump As China’s Economic Turbulence Hits Luxury Market
Industry-wide, sales are expected to remain flat this year, marking the second consecutive year of lackluster demand. This is a significant deviation from the norm, as the industry typically grows at twice the rate of global economic growth.
Furthermore, Gen Z’s spending on luxury goods fell by 7% last year, equivalent to a $5.7 billion drop. This decline is attributed to negative stories about the industry’s supply chain abuses and extreme price markups going viral on social media, reports the outlet.
The luxury industry is now 50% larger than a decade ago, making growth even more challenging for established brands. Despite these hurdles, new creative designers from major luxury brands like Chanel, Gucci, and Dior are set to unveil fresh collections later this year.
Why It Matters: The luxury goods market is facing a critical juncture. The industry’s growth has traditionally outpaced global economic growth, but recent trends suggest a possible structural shift.
The decline in Gen Z’s spending, driven by concerns over supply chain abuses and extreme price markups, indicates a changing consumer landscape.
The industry’s response to these challenges, including the introduction of new collections by major brands, will be crucial in determining its future trajectory.
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Image: Shutterstock/Andrei Antipov
