Following a challenging period, the high-end goods sector is set to sustain its rebound into the fourth quarter, extending the positive trajectory observed in the third quarter. Market analysts anticipate a moderate uptick in Q4 performance, largely consistent with Q3's results. This expected growth is underpinned by the enduring strength of the American stock market, nascent signs of stability within the Chinese economy, and the initial benefits of luxury brands recalibrating their strategies. HSBC foresees a 2.6% rise in global luxury sales for Q4 2025, building on a 3.2% increase in Q3, and contrasting with declines in the first two quarters of the year. The US market, in particular, is witnessing elevated luxury demand, driven by a perception of increased wealth among affluent individuals, directly correlating with higher purchasing activity.
However, the sector faces hurdles in certain regions. Europe and Southeast Asia are identified as potential weak spots due to a reduction in tourist expenditures. Furthermore, geopolitical tensions between China and Japan are expected to curb Chinese tourist arrivals in Japan, negatively impacting local luxury sales. A significant factor influencing European luxury firms is the strong euro against the US dollar and Chinese yuan, which inflates the overseas cost of European-made goods. This scenario underscores a shifting emphasis towards catering to domestic consumers, as brands acknowledge the decreased likelihood of a major return of Chinese and American aspirational shoppers to Europe. Consequently, regional managers are intensely focused on leveraging their local customer bases. The competitive landscape also reveals a continuing divergence among companies, with some brands like Brunello Cucinelli and Richemont demonstrating strong sales growth, while others, such as LVMH and Kering, face expected sales declines in specific divisions, highlighting varied brand performances.
The 'K-shaped' economic recovery, characterized by growth at the top end of the market while the lower end struggles, remains a prevailing theme, though there are indications that this disparity may begin to narrow. While ultra-wealthy consumers have consistently supported top-tier luxury brands, brands targeting middle-income customers are now showing early signs of recovery, partly attributed to strategic repositioning and more accessible price points. Some luxury houses are actively combating 'greedflation' by adjusting their product offerings and introducing more reasonably priced items, which could positively influence Q4 results. This strategy is exemplified by brands like Burberry, Gucci, Dior, and Chanel launching new collections with more moderate price tags. Additionally, the recent debuts of new creative directors at several leading luxury brands are generating excitement and boosting store traffic, with new collections expected to drive sales as they become more widely available. Major retail expansions, such as Louis Vuitton's new flagship in South Korea and Dior's extensive development in Beijing, further signal a robust commitment to enhancing the customer experience.
Looking forward, the luxury industry is projected to return to a more typical growth rate, aligning with its historical average of 6.5%. This growth will be primarily fueled by American consumer spending and a gradual improvement in the Chinese market. Brands must remain vigilant regarding currency fluctuations, which could impact profit margins. While concerns persist about rising gold prices potentially capping jewelry demand and the recent influx of creative directors possibly diverting spending towards ready-to-wear, current evidence does not suggest a decline in jewelry's exceptional performance. The industry's adaptability and focus on strategic innovation, including new pricing models and captivating retail experiences, are vital for sustained success in an evolving global market.