Une Remontée Du Luxe Français À Venir ?
French luxury is facing a macroeconomic environment that is less supportive than over the past decade. China, which accounts for around a third of global demand, is going through a delicate cycle: sluggish growth, household confidence eroded by the property crisis, and youth unemployment that remains high.
Chinese consumers, historically the engine of luxury growth, are reallocating their spending more selectively. The rise of the second-hand market reflects both a desire to access luxury despite tighter income constraints and a search for a safe haven in tangible assets.
Although still marginal on a global scale, this trend weakens the pricing power of the luxury houses in the aspirational segment. Added to this is a geographical shift in consumption: domestic demand is weakening but outbound travel is resuming, which supports sales in Europe and in travel retail.
However, while footfall is increasing, the average basket per tourist remains below 2019 levels, which mechanically erodes profitability.
On the Western side, the climate is no simpler. In the United States, the consumption environment is becoming more complex. US trade policy has maintained tariffs of around 15% on a wide range of European products, including luxury goods.
Although some luxury houses such as Kering have announced targeted price increases to compensate, the ability to pass on these additional costs in full depends on brand strength and customer loyalty. LVMH, with significant exposure to wines and spirits (cognac, champagne), is bearing the brunt of these frictions.
Half of the luxury industry’s sales growth came from price increases over the four years from 2019, compared with a third between 2016 and 2023, according to UBS analysts.
Yet the sector lost 50 million customers last year, according to Bain & Company, as economic pressures and rising prices dampened appetite for designer clothing and handbags.
In Europe, demand remains relatively stable but is no longer an independent driver of growth. The environment is marked by constrained purchasing power, and consumption that favours local discretionary spending (travel, dining) rather than durable goods or luxury purchases.
French luxury houses nevertheless benefit from the return of Asian tourist flows, which supports Paris, Milan and London as consumption hubs. However, these flows remain vulnerable to geopolitical fluctuations and visa policies.
Another major unknown lies with the central banks: in the United States, a still-cautious Fed, faced with sticky inflation, limits visibility on interest rates, which indirectly weighs on household confidence. In China, successive monetary easings have not been enough to fully revive demand, and households continue to exhibit a high propensity to save.
Lastly, an often underestimated factor is societal change. Demand for luxury is meeting a more critical perception in certain Western countries: social concerns, the rise against ostentation in contexts of constrained purchasing power, and the development of environmental values that encourage buying second-hand rather than new.
This does not destroy the market, but it does reshape purchasing behaviours, particularly among younger generations.
Over the next 6 to 12 months, the base case is organic growth close to zero for the French sector as a whole, with moderate pressure on margins linked to costs and taxes.
In the favourable case, a clearer recovery in Chinese consumption and a positive clarification of the US tariff timetable would offer a rebound, whereas a bearish scenario would combine tougher trade, a strong dollar, and prolonged weakness in Chinese demand.
Immediate catalysts include Golden Week and Singles’ Day, major tests for Asian consumption, as well as developments in the negotiations between Washington and Brussels.
In summary, the macro picture today is marked by a triple constraint: China operating below potential on a structural basis, a more hostile US trade environment, and a more selective Western consumer. French luxury retains its structural strengths (iconic brands, pricing power, scarcity), but its growth horizon now depends far more on macroeconomic developments than on operational execution alone.
BENEFICIARIES
In terms of positioning, it appears sensible to overweight Hermès, whose scarcity/captive-demand model remains the most defensive, and to hold LVMH while favouring its most robust segments (Fashion & Leather Goods, Selective Retailing), while staying mindful of the vulnerability of Wines & Spirits to US tariffs. Conversely, Kering deserves to be underweight for the time being until Gucci’s relaunch shows tangible effects on sales and margins.
More information available in the Full Trade Idea
Product Snapshots
For informational purposes only. Not investment advice.
French luxury is facing a macroeconomic environment that is less supportive than over the past decade. China, which accounts for around a third of global demand, is going through a delicate cycle: sluggish growth, household confidence eroded by the property crisis, and youth unemployment that remains high.
Chinese consumers, historically the engine of luxury growth, are reallocating their spending more selectively. The rise of the second-hand market reflects both a desire to access luxury despite tighter income constraints and a search for a safe haven in tangible assets.
Although still marginal on a global scale, this trend weakens the pricing power of the luxury houses in the aspirational segment. Added to this is a geographical shift in consumption: domestic demand is weakening but outbound travel is resuming, which supports sales in Europe and in travel retail.
However, while footfall is increasing, the average basket per tourist remains below 2019 levels, which mechanically erodes profitability.
On the Western side, the climate is no simpler. In the United States, the consumption environment is becoming more complex. US trade policy has maintained tariffs of around 15% on a wide range of European products, including luxury goods.
Although some luxury houses such as Kering have announced targeted price increases to compensate, the ability to pass on these additional costs in full depends on brand strength and customer loyalty. LVMH, with significant exposure to wines and spirits (cognac, champagne), is bearing the brunt of these frictions.
Half of the luxury industry’s sales growth came from price increases over the four years from 2019, compared with a third between 2016 and 2023, according to UBS analysts.
Yet the sector lost 50 million customers last year, according to Bain & Company, as economic pressures and rising prices dampened appetite for designer clothing and handbags.
In Europe, demand remains relatively stable but is no longer an independent driver of growth. The environment is marked by constrained purchasing power, and consumption that favours local discretionary spending (travel, dining) rather than durable goods or luxury purchases.
French luxury houses nevertheless benefit from the return of Asian tourist flows, which supports Paris, Milan and London as consumption hubs. However, these flows remain vulnerable to geopolitical fluctuations and visa policies.
Another major unknown lies with the central banks: in the United States, a still-cautious Fed, faced with sticky inflation, limits visibility on interest rates, which indirectly weighs on household confidence. In China, successive monetary easings have not been enough to fully revive demand, and households continue to exhibit a high propensity to save.
Lastly, an often underestimated factor is societal change. Demand for luxury is meeting a more critical perception in certain Western countries: social concerns, the rise against ostentation in contexts of constrained purchasing power, and the development of environmental values that encourage buying second-hand rather than new.
This does not destroy the market, but it does reshape purchasing behaviours, particularly among younger generations.
Over the next 6 to 12 months, the base case is organic growth close to zero for the French sector as a whole, with moderate pressure on margins linked to costs and taxes.
In the favourable case, a clearer recovery in Chinese consumption and a positive clarification of the US tariff timetable would offer a rebound, whereas a bearish scenario would combine tougher trade, a strong dollar, and prolonged weakness in Chinese demand.
Immediate catalysts include Golden Week and Singles’ Day, major tests for Asian consumption, as well as developments in the negotiations between Washington and Brussels.
In summary, the macro picture today is marked by a triple constraint: China operating below potential on a structural basis, a more hostile US trade environment, and a more selective Western consumer. French luxury retains its structural strengths (iconic brands, pricing power, scarcity), but its growth horizon now depends far more on macroeconomic developments than on operational execution alone.
BENEFICIARIES
In terms of positioning, it appears sensible to overweight Hermès, whose scarcity/captive-demand model remains the most defensive, and to hold LVMH while favouring its most robust segments (Fashion & Leather Goods, Selective Retailing), while staying mindful of the vulnerability of Wines & Spirits to US tariffs. Conversely, Kering deserves to be underweight for the time being until Gucci’s relaunch shows tangible effects on sales and margins.
More information available in the Full Trade Idea
Product Snapshots
For informational purposes only. Not investment advice.