The luxury goods industry continues to slow down: Who is surging? Who is plummeting?

The luxury goods industry, entering a downturn cycle, continues to decline.

In the second quarter, LVMH, the world's largest luxury goods group, saw a 4% drop in revenue, with both revenue and profit declining in the first half of 2025. Operating profit plummeted by 15%, and net profit fell by 22%. Among these, the core fashion and leather goods division, which includes LV and Dior, performed the worst. According to the latest 2025 French wealth rankings, LVMH CEO Bernard Arnault has lost his position as France's richest person, with his personal wealth shrinking to its lowest level since 2020.

Kering Group reported second-quarter revenue of €3.7 billion in 2025, a year-on-year decrease of 15%, falling short of market expectations. Its total revenue for the first half of the year dropped by 16% year-on-year, with net profit plummeting by 46%. Gucci, the pillar of the group's revenue, saw a 26% year-on-year decline in second-quarter revenue, marking the sixth consecutive quarter of sales decline for Gucci. YSL's second-quarter revenue also fell by 13% year-on-year. Over the past two years, Kering's stock price has cumulatively dropped nearly 60%.

Consulting firm Bain has revised its previous forecast for the global luxury goods industry, predicting a growth rate of 0-4% in 2025, now believing that global luxury market sales may decline by 2% to 5% in 2025.

LVMH Group Stock Price Trends

The good news is that amidst the overall slowdown, several bright spots have emerged:

• Miu Miu, under the Prada Group, saw a 40% surge in second-quarter revenue, with annual revenue expected to surpass €1.5 billion for the first time in 2025.
• Richemont exceeded market expectations, with a 6% year-on-year revenue growth to €5.41 billion in the first quarter of fiscal year 2026 (ending June 30), and the jewelry segment's sales increased by 11%, achieving double-digit growth for three consecutive quarters.
• Hermès continued to perform steadily, with a year-on-year revenue growth of 8.1% to €8.034 billion in the first half of the year, and operating profit increased by 5.7% to €3.33 billion. Although the operating profit margin slightly decreased by 0.6 percentage points to 41.4%, it remains above the industry average.

Amidst the ups and downs, the "layered" trend in the luxury goods industry is becoming increasingly evident. Meanwhile, some common trends are also surfacing.

The Japanese Market is Stagnant

Except for Hermès, which saw a 16% year-on-year revenue growth in the Japanese market in the first half of the year, the performance of other brands in Japan can be described as "difficult to express."

• Kering Group reported a 21% year-on-year decline in comparable revenue in the Asia-Pacific region in the first half of the year, with a 20% decline in the Japanese market;
• LVMH Group's revenue in the Asia-Pacific market (excluding Japan) fell by 9% year-on-year in the first half of the year, with a 15% decline in the Japanese market, and a staggering 28% drop in the second quarter;
• Prada's revenue in the Japanese market increased by 4% year-on-year to €326 million, but the growth rate is the smallest among all major regions;
• Richemont showed a greater contrast, with revenue in the Asia-Pacific region remaining basically flat compared to the same period last year, while the Japanese market saw a significant decline of 15%.

LVMH stated that this was mainly affected by last year's high base, as the depreciation of the yen last year stimulated global tourists from China and other countries to consume in Japan, driving a 57% surge in organic revenue in the Japanese market in the second quarter of last year. The group noted that the significant weakening of tourism retail in Japan this year has dragged down the performance of the fashion and leather goods sector. Although some local consumption from China has returned, it has not fully offset the decline in Japan.

This is also a common issue faced by other luxury goods groups, as the yen appreciation, exchange rate advantage weakening, and rapid decline in tourist consumption have led to the disappearance of growth in the Japanese market.

Channel Restructuring: Pausing Downward Expansion, Focusing on Core Areas

In the face of enormous challenges, channel contraction is an inevitable choice for most brands.

Kering, under the most pressure, has made the most adjustments, closing a total of 18 stores in the first half of the year, 7 of which are located in the Asia-Pacific region (excluding Japan). The store closure plan for this fiscal year has been raised from 50 to 80.

Other brands have also mostly closed some stores in second-tier cities and below. For example, Cartier closed its only store in Guizhou, the Guiyang Lixing Center boutique, in April this year, Bottega Veneta closed its Taiyuan Wangfujing store in March, and Tiffany and Loewe had already closed all stores in Yunnan last year. A report from the Luxury Think Tank pointed out that the number of new store openings (including pop-up stores) and store renovations for luxury brands in the Chinese market in the first half of 2025 is expected to decrease by about 30%, indicating that the channel adjustments of luxury brands are accelerating and deepening.

The reasons behind this are not difficult to understand.

First, most stores in second-tier cities were opened during a phase of rapid expansion. Now that the pace has slowed, closing these stores can help alleviate operational pressure and provide an opportunity to reshape the channel network and eliminate outdated store formats. Executives from Kering stated in the earnings report meeting that store optimization is not simply about reducing size, but rather aims to enhance the overall quality of the store network by closing smaller stores and opening/expanding high-quality stores.

Second, first-tier cities are the main battleground for luxury brands. Concentrating resources in core areas to create benchmark store types can better attract external attention.

Taking the Chinese market as an example, in the first half of this year, major brands opened or upgraded several key stores in first-tier cities: LV's "Louis Number" opened in Shanghai at the end of June attracted a lot of attention, drawing numerous fans to visit and frequently trending on social media; Tiffany's Shenzhen MixC boutique, Graff's Beijing Wangfujing Central jewelry flagship store, and Balenciaga's Beijing Sanlitun flagship store have also generated continuous buzz after their openings.

Third, from the perspective of brand building, reducing offline touchpoints can create a sense of distance, raise the consumption threshold, and thus strengthen the exclusivity of luxury goods, further narrowing the consumer circle. This is also a way for luxury brands to regain a sense of scarcity.

Restraint in Marketing: Regaining Trust in Luxury Goods

Like physical stores, luxury brands' marketing strategies are gradually shifting towards a "quality over quantity" approach, with restraint becoming a key term.

On one hand, there is a reduction in the frequency of marketing activities, material placements, and social media exposure, moving away from the pursuit of continuous visibility. Valentino announced earlier that starting this year, it will hold only one haute couture show per year, and the ready-to-wear collections for men and women will be combined for a runway show during Paris Fashion Week.

On the other hand, in daily marketing activities, brands are not overly emphasizing brand elements, preferring to engage in "subtle" marketing. In June this year, Hermès held a new women's collection launch in Shanghai—this was the brand's second time hosting a women's show outside of Paris, and there was almost no pre-event hype. The venue was extremely "clean," with no light signs, no large logo walls, and no red carpet for guests, focusing solely on the show itself; Loro Piana's retrospective exhibition held in March this year at the Shanghai Pudong Art Museum also maintained a low profile, dedicating a large amount of space to showcase the brand's history and production processes, with minimal large posters or materials both inside and outside the venue.

Tomas Maier, the former creative director who led Bottega Veneta's transformation, once stated: "Luxury is not something you can see at first glance; it is not exposed, it needs to be felt." The increasingly restrained marketing of luxury brands aims to liberate consumers from the dazzling activities and overwhelming materials, guiding them to experience the deeper cultural essence of the brand.

Moreover, in recent years, the frequent failures of wealth flaunting influencers have reminded luxury brands to pay attention to public opinion risks. There has long been a saying in the luxury goods circle called "Luxury Shame," which refers to the excessive flaunting during economic downturns becoming a target for public criticism. By actively reducing exposure and tempering their brilliance, luxury brands can, to some extent, lower public opinion risks, avoid misrepresentation of their brand image, and reclaim narrative authority from social media—sometimes, restrained marketing is the best marketing.

Conclusion

In the cyclical downturn, the luxury goods industry is undergoing a profound adjustment: leading brands are experiencing varied fluctuations, accelerating their return to core areas, and marketing strategies are becoming more restrained and introverted. Clearly, the restless incremental logic is retreating, replaced by a genuine competition of brand strength, product quality, and aesthetic appeal.

Amidst the ups and downs, you will find that the essence of the luxury goods industry has not changed. It is not just a business about money; it is also a continuously evolving cultural narrative and emotional insight.

Author of this article: He Li, Source: Shenxiang, Original title: "The Luxury Goods Industry Continues to Slow Down: Who is Soaring? Who is Plummeting?"

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at your own risk