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If you’ve been following the luxury sector, you’ve probably seen your fair share of sobering news. On the surface, it may look like the era of high-end handbags and bespoke suits is coming to an end.
But dig a little deeper, and a different story emerges—one filled with opportunity for the patient, value-oriented investor.
I’ve studied markets for decades, and if there’s one thing I know, it’s that cyclical downturns often present the best entry points. I believe the current luxury slump is no exception. In fact, the data tells me we may be on the verge of a comeback.
Luxury’s Slow Year May Be the Setup for Its Next Great Comeback
Last year, global luxury sales posted their weakest performance since the 2008 financial crisis—excluding the COVID years—and 2025 isn’t off to a roaring start, either. Bain & Company projects sales will shrink by another 2% to 5% this year. That’s not what you’d expect from an industry that’s historically grown at twice the rate of global GDP.
But here’s the thing: This isn’t the first time luxury has hit a soft patch, and every time, it’s come back stronger.
Take 2015, for example. Back then, consumers began to turn away from flashy logos, and major brands like Louis Vuitton were forced to rethink their design philosophy. The result? A pivot to more understated, timeless styles like the Capucines bag, now one of LV’s bestsellers. Sales bounced back, and those who kept the faith were richly rewarded.
Will Steeper Costs Deter High-End Shoppers?
Tariffs are the 800-pound gorilla in the room. The Trump administration recently struck a new trade deal with the European Union, raising import duties on European goods from 10% to 15%. That’s got some investors worried about rising prices and shrinking margins for European luxury brands selling in the U.S.
According to UBS, a 15% tariff translates to about a 2% price increase in the U.S., or just 1% globally if brands adjust across markets. That may be manageable, especially for a high-net-worth individual (HNWI) with the means to drop $8,000 on a cashmere cardigan or $10 million on the original Hermès Birkin. For these shoppers, it’s all about status, scarcity and quality, not necessity.
The Return of Chinese Tourists
No discussion of luxury is complete without China. Before the pandemic, Chinese travelers accounted for roughly two-thirds of their luxury spending outside of China. That changed when the pandemic hit, and many brands pivoted to local markets.
Now, with international travel picking up again, we may be on the cusp of a reversal. Chinese tourists are venturing back into Europe, where luxury goods often sell for 5% to 45% less than in China due to taxes and pricing strategies. That price gap creates an irresistible incentive to buy abroad.
To be clear, sales in mainland China are still soft. Bain estimated a 20% drop last year, and some brands like Richemont reported a 23% decline.
But the secular tailwind of rising wealth in China hasn’t gone away. In 2024 alone, over 141,000 new millionaires were minted in China—more than 380 a day. Over time, that wealth will find its way into high-end purchases, whether from Western brands or increasingly popular domestic designers.
America’s Quiet Wealth Boom
Closer to home, the U.S. continues to lead the world in absolute wealth. According to the latest UBS Global Wealth Report, the country now boasts nearly 24 million millionaires—more than the next seven countries combined. That’s nearly 40% of the world’s total.
And that number is only expected to grow. UBS forecasts that 5.3 million Americans will join the millionaire club by 2029, a nearly 9% increase. This matters because luxury demand tends to track wealth creation more than overall GDP. The stronger the stock market and real estate, the better luxury has traditionally performed.
Good news, then, that financial markets are booming. The S&P 500 recently hit an all-time high, before Trump announced a new battery of tariffs. Bitcoin, often a leading indicator of risk appetite, touched $120,000. That tells me that investor confidence is healthy.
When you pair that with a tax environment that favors high earners (thanks in part to the One Big Beautiful Bill), the case for luxury demand staying strong looks compelling, at least to me.
Mixed Financial Results
Not all brands are hurting. Hermès reported an 8% increase in revenue for the first half of 2025. Prada’s total sales rose 9%, with its trendier Miu Miu line surging a whopping 49%. Even Richemont, which owns Cartier, saw group sales rise 6%, despite Chinese weakness.
As for the laggards, Gucci’s sales fell 26% in the first half, dragging down Kering’s overall numbers.
Some, like LVMH, are using this period to buy back shares. Bernard Arnault, the group’s founder and CEO, has personally bought over $1 billion worth of LVMH stock this year.
As I often say, follow the money, especially when it’s coming from insiders.
Luxury Stocks Trading at a Discount
Perhaps the most attractive part of the luxury story today is valuation.
UBS strategist Andrew Garthwaite notes that luxury stock valuations have dropped to a 15-year low relative to the market. Historically, when this has happened, the group outperformed the broader market 76% of the time over the next three months, and 100% of the time over the next six months.
That’s the kind of asymmetry we look for as long-term investors. You’re buying world-class brands at discounted prices, right when sentiment is near a trough.
In other words, luxury is starting to look like a deal.
Warren Buffett once said it’s “better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Today, some of the world’s most admired brands are trading at levels we haven’t seen in over a decade. That may not last long.
Related: Why the Market’s Rally Makes Sense—And the Data Backs It Up