Can Luxury Bounce Back? The Bears Are Getting Louder

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Now is the spring of our discontent: Nearly everyone I’ve spoken to lately seems to be running low on patience — and hope — for big luxury brands to bounce back from their multi-year slump.

Fashion’s sweeping program of designer resets has largely succeeded at renewing interest and buzz. People are paying attention again to what Gucci, Dior, Tom Ford, Margiela and Chanel are doing. But with the exception of that last one — where early signals from the retail rollout of Mattheiu Blazy’s collections suggest customers are buying into the products, not just the image — designer resets have yet to materially impact sales. Fashion increasingly seems like a spectator sport, consumed on Instagram.

It’s still early days: big brands can’t overhaul their assortment overnight. But should they need to? All of this attention ought to be creating a halo for icons and carry-over products. But buzz isn’t a substitute for market fit, and nearly three years into the industry’s downturn a lot of brands are still focussed on getting people to care about $4,000 handbags, and struggling to cover other segments with designs that feel like more than a consolation prize.

In this week’s edition:

• Berenberg and Bernstein cut forecasts for luxury.
• Placemaking is in focus as brands retool store networks to focus on prime locations and tap executives from food and art.

Quick Hits

A few items from the news before we dive into the week’s main topics.

• Burberry reported full-year results Thursday. The company returned to growth and profit by cutting costs and pushing its more accessibly priced icons like scarves and polos.
• Shares nonetheless slipped in response to a vague outlook, forecasting only revenue growth and margin improvement this year without providing more detail.
• The company also named its next chair, William Jackson, founder of private equity fund Bridgepoint. His most notable exposure to the retail sector was as the main investor in Pret-a-Manger. Current chair Gerry Murphy is stepping down in November.
• Dior staged a show for its 2027 Cruise collection at the LACMA in Los Angeles.
• Irish actress Alison Oliver looked like a dead ringer for Ingrid Bergman in the teaser reel shot by the Posternaks. The art direction and imagery coming out of Jonathan Anderson’s Dior just keeps getting better.
• I loved the high-texture floral looks in this collection. Also, the Ed Ruscha collab for menswear. Shoes were fantastic again.
• It was smart for Anderson insist on a few ideas from his first few collections (the plissé tunic shapes, beaded curtain dresses) while steering them toward more possible territory with the styling. The overall impact was more refined. But there was also a lot to digest: a tighter edit would have helped to highlight what women are meant to actually want from the new Dior.
• Angelo Flaccavento and Susie ‘Bubble’ Lau were there for BoF. You can find their take here.

Cutting Forecasts for Luxury

I can’t say I was surprised to see a spate of gloomy reports lowering forecasts for luxury this week. I’ve been keeping a closer-than-usual eye on Paris’ main shopping streets, and with very few exceptions the stores have been mostly empty. Empty Versace, despite all the hype for Dario’s one-and-only collection, empty Vuitton–eery! Chanel and Saint Laurent have been a bit busier, but hardly mobbed.

This is reflected in the numbers. War in the Middle East dominated the narrative during Q1 results season, but even correcting for that crisis the underlying sales momentum remains lacklustre, two-plus years into a sector-wide downturn.

“The sector’s weak fundamentals remain unchanged,” Berenberg analysts wrote May 8. “We would be sellers of any bear market rally. Even adjusting for the impact of the conflict in the Gulf, the weakness of the underlying Q1 data raises questions about whether luxury remains a growth sector. The Chinese and aspirational consumers continue to struggle, burdened by structural headwinds that are yet to abate.”

Berenberg breaks down the bear case for luxury point-by-point:

• Luxury growth remains anaemic. Q1 sales rose +3 percent year-on-year despite easy comps (less than inflation). ‘Absolute’ luxury (Hermès, Brunello Cucinelli) continues to outperform more aspirational luxury.
• Middle East impact masks underlying weakness: “Management teams were quick to highlight the impact of the Middle East conflict, providing the market an excuse to cut FY26 consensus revenue growth expectations.”
• The Chinese bear case: “China faces a balance sheet recession, whereby high debt levels and a sustained fall in house prices depress discretionary spend. Combined with weak demographics, deflation and policy mistakes, China is Japan 2.0. Underlying spend by the Chinese consumer continues to contract. LVMH’s “flattish” and Kering’s “down mid-teens” commentary on their respective Chinese clusters in Q1 were flattered by very soft comps.”
• Creativity isn’t translating to sales: “Ability, not willingness, of consumers to buy remains the core issue: There was much excitement in 2025 as 20+ new designers were announced, including at Dior and Gucci. The bulls viewed this as a key catalyst to revive sector growth. While still early, the lack of visible impact suggests that it is the ability not willingness of aspirational consumers to buy that is the real issue. Further hints come from Louis Vuitton where, despite being one of the best-managed brands in the sector, investors are beginning to question its ability to grow at historical rates.
• More downside risk on estimates: Consensus continues to model sector revenue growth returning to 6-7 percent per year in six months’ time. “We think that this is unrealistic given the structural squeeze on Chinese and aspirational consumers,” Berenberg said.

Barclays also put out a bearish report, suggesting growth would remain lacklustre near-to-medium term and then slow down further long-term.

• “We expect no more than 3 percent industry growth in 2026 and global luxury sector CAGR to normalise at 4 percent 2027-2029… This outlook assumes no deterioration in macro conditions, no escalation of geopolitical conflicts, and no major shocks to global wealth creation — risks that remain very much present.”
• “Longer term, we expect 2.5 percent growth for the sector as we question the durability of four of the key pillars that have historically underpinned luxury growth — social stratification, peacetime prosperity, globalisation and emancipation — as well as the sector’s ability to continue scaling while preserving exclusivity.”
• “The industry is likely to become increasingly less tolerant of inefficiencies, sub-scale assets and underinvestment, potentially accelerating M&A activity to the benefit of industry leaders.”

Gird your loins. The only good news, according to Barclays, is that most of the slowdown is already priced in. The dip in luxury stocks (LVMH is down 28 percent year-to-date) has already wiped out nearly all of the sector’s post-pandemic gains, compared to a far more modest decline in fundamentals.

It’s worth mentioning that not all sell-side analysts are on board with this bear case: UBS’ Zuzanna Pusz reminds me that we’ve seen this movie before, when a crackdown on gifting and corruption in China coincided with widespread brand fatigue from 2014 to 2016. Brands retooled their offer — adding streetwear and sneakers to keep up with casualisation — and went all-in on the creative visions of designers like Alesssandro Michele, and it worked. Despite easy comps, she sees sequential improvement over the past quarter as a sign that novelty is getting customers in the door yet again.

The Business of Placemaking

As renewed designer buzz struggles to meaningfully ignite store traffic, placemaking continues to emerge as a top priority.

It’s hard to consider bankrolling splashy retail investments in the midst of a sector-wide downturn with no end in sight. Mega-stores remain reserved for mega-brands: Louis Vuitton’s “Le Louis” flagship in Shanghai, Tiffany’s Landmark, Dior’s Avenue Montaigne complex (and its little sister on Madison Avenue). Hermès has one coming on New Bond Street, set to open in June. Gucci has a massive new Paris location forthcoming on Rue de Castiglione.

Marshalling the funds for this kind of location requires a rethink of the global network: BoF’s Eric Sylvers had a feature this week on how fewer, but more spectacular locations are driving the market.

For brands that can’t rely on blunt scale, service and uniqueness are the ordre du jour for turning a store into a destination.

• Uniqueness: The immersive apothecary concept at Officine Buly keeps a line going in front of their Rue Bonaparte boutique rain or shine, 7 days a week – even as the brand has opened additional locations across the city. People may not be as broadly excited about Lemaire’s understated, ultra-functional workwear aesthetic as they were a few seasons ago. But the brand’s Rue Elzevir hub in the Marais continues to consistently draw a crowd with its curated universe featuring Gerrit Reitveld chairs, bejmat tiles, sculptural pedestals for accessories, and exhibitions of limited-edition art and accessories (not to mention the clothes).
• Service: I have rarely seen a Rimowa store empty. Their warranty programme means there’s almost always a critical mass of people coming in and out for repairs, many of whom end up making new additions to their luggage sets or loading up on packing cubes and other add-ons.

“We’re reentering an era where the importance of stores and physical spaces is going to be increasingly important in people’s minds across generations and especially for younger customers,” Paul Smith’s executive chairman Ewan Venters told me on a call this week. “People want to touch stuff, feel stuff, have a conversation about things. They want to learn and be educated about how something is made and why.”

Prior to joining Paul Smith last year, Venters was CEO of London’s Fortnum & Mason — an iconic food emporium which has reemerged as one of Britain’s premier gifting and tourist destinations — before piloting the global expansion of art giant Hauser & Wirth, which doubled its network from 9 to 18 galleries over the space of 5 years. Hauser & Wirth also pushed into food and hospitality with its “Artfarm” network of restaurants and hotels.

This week, the brand named a new managing director, Zia Zareem, who previously worked with Venters at Hauser & Wirth and Fortnum & Mason, as well as a stint at Selfridges.

Whether it’s bags, biscuits or blue-chip art, the key to effective placemaking “is to build a network so you can bring people in, not just for a glass of champagne but so you can say ‘I know what you like and I’ve got some things put to the side,” Venters said. “Then you have to keep doing things that are unexpected” — whether it’s the buzzy exhibition programming at galleries like Hauser & Wirth or “clever collaborations”. Paul Smith is currently seeing traction with its “Made in the British Isles” program of collaborating with British and Irish producers including ceramicists, knitters and more, Venters said.