Are Luxury Megabrands Broken?

Over the past fifteen years, fashion’s luxury megabrands have had a terrific run, buoyed in part by upgrades to their product mix and high price inflation, amid historic levels of new wealth creation in China and a strong economy and soaring stock market in the US.

Exhibit A: sector leader LVMH repositioned its flagship Louis Vuitton brand starting with the launch of the upmarket Capucine bag back in 2013, and the results have been spectacular, as the strategy shift dovetailed with very strong growth in high-end consumer spending and defused the risk of customers trading up to top-end competitors.

Yet, simultaneous crises at LVMH, Kering and Chanel — albeit different in nature — beg the question: is something wrong with fashion’s luxury megabrands?

Even if we set aside Kering’s deeply troubled flagship Gucci, we have seen faltering sales momentum at Chanel and LVMH’s fashion and leather goods division amid the apparent success of accessible luxury brands like Coach and Ralph Lauren Polo, and the rapid growth of Richemont’s jewellery maisons.

The other puzzling sign is smaller high-end brands taking market share during the post-Covid boom normalisation. This is happening in the top-end quiet luxury space, with Loro Piana and Brunello Cucinelli the epitome of this trend. But this is also happening with fashion-driven propositions like Prada’s Miu Miu, which has more than doubled its size.

So what’s going on?

It’s probable consumers are reacting to an innovation deficit at megabrands.

Several megabrands have recently seriously failed to excite consumers with failed reinvention attempts or more of the same. It’s easy to single out Gucci, which has gone down a dead end in its effort to become more classic. But Dior is suffering badly, too, with estimated sales down double digits last year, a key reason for its updated creative team.

Louis Vuitton deployed a skilful Takashi Murakami strategy to keep things reasonably buoyant, but there are signs of malaise at LVMH’s flagship brand, too, while Chanel has pulled back on price hikes amid lagging leather goods sales.

One lens to understand what is going on is to factor in the effect of a lower number of new customers moving into the market. New consumers would naturally gravitate towards megabrands: they have to tick the box and secure their luxury wardrobe foundations.

Consumers further along the experience curve will want to be excited and have new reasons to part with their money. They have the basics already. They are more open to experimentation and newness the richer they are.

Indeed, a number of converging factors have coalesced to wrong foot most soft luxury goods megabrands in the last 18 months. 1) China, where a majority of new luxury consumers are created, is facing a continued real estate crisis and lower consumer confidence. 2) Higher inflation, higher interest rates and lower job security have put pressure on middle class consumers in the US and Europe. 3) Most soft luxury megabrands have embraced more of the same in the post-Covid-19 boom — or failed to successfully innovate. 4) Jewellery has become cheaper in relative terms to leather goods, as soft luxury brands have jacked up prices, making it appear better value for money to consumers.

Many of these headwinds may well reverse in the next few years, however. 1) Many soft luxury megabrands have worked to adjust their product assortment, in an effort to re-engage entry-level consumers. 2) Most soft luxury megabrands have hired new creative directors to refresh their appeal and we will see an unprecedented volume of newness at the Spring Summer 2026 fashion shows this autumn. 3) Jewellery brands have taken the relay, increasing prices faster, to try and compensate for the rising price of gold. 4) Best in class mega-brands like Vuitton have sought to recruit new middle-class consumers, with major sponsorships such as Formula 1 and the Olympics.

Stay tuned.

Luca Solca is head of luxury goods research at Bernstein.