Live Markets: Beyond the label: Are Europe's luxury giants out of fashion?

Brunello Cucinelli SpA

17/11/2025 15:43

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BEYOND THE LABEL: ARE EUROPE'S LUXURY GIANTS OUT OF FASHION?

Europe's biggest luxury houses, including LVMH LVMH.PA, Kering PRTP.PA and Chanel, are facing a "mega-brand paradigm crisis" as high prices and a lack of innovation fuel gains for smaller brands, according to Bernstein.

The STOXX 600's luxury sector .STXLUXP has staged modest gains this year and has underperformed the benchmark .STOXX as the companies navigate challenges in top market China on one hand and U.S. tariffs on the other.

Europe's luxury industry has benefited from an "upgraded product mix and high price inflation" over the past 15 years, particularly during the post-pandemic boom, says Bernstein.

However, since then their innovation efforts have proven to be fruitless and product offerings are lacklustre, while the number of customers moving into the luxury market has been shrinking.

Further, preferences of luxury customers also seem to be evolving into an appetite for something more bespoke, which has led to high-end brands such as Loro Piana, Brunello Cucinelli BCU.MI and Miu Miu gaining market share, according to the brokerage.

Earnings for the consumer cyclicals sector fell 11.2% during the third quarter from the previous year, starkly underperforming the 6.2% growth for the broader STOXX 600, according to data compiled by LSEG.

But all is not lost, says Bernstein, adding that there are several tailwinds for the sector in the years ahead.

For starters, many mega-brands are actively adjusting product assortments to attract entry-level consumers, while also refreshing their creative leadership. Bernstein expects these changes could see an unprecedented volume of products during the Spring-Summer fashion shows of 2026.

Further, with elevated precious metal prices making jewelry more expensive for customers, the tide could change for luxury brands.

 (Akriti Shah)
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