Luxury Sales to Rise 3–5% in 2026 as Brands Shift Strategy

The luxury goods market is expected to regain momentum in 2026 after two years of stagnant growth, according to Bain & Co.. High-end products like jewelry, leather goods, and ready-to-wear fashion are projected to see a 3–5% rise in sales next year at constant exchange rates. Claudia d'Arpizio, a Bain partner, noted that the market has been in a "reset phase" as brands recalibrate their pricing and creative strategies to rebuild demand.

The sluggish growth over the past two years was partly due to aggressive price hikes aimed at increasing exclusivity, which instead discouraged consumers. Brands are now introducing new entry-level products and hiring fresh designers to reinvigorate interest, d'Arpizio added. This strategic shift is expected to attract a broader customer base and stabilize demand.

Emerging markets are also expected to contribute significantly to the sector's recovery. A research report from ResearchAndMarkets.com forecasts a compound annual growth rate (CAGR) of 4.3% for the global luxury goods market from 2025 to 2034, with the market size expanding from $238.83 billion to $354.7 billion.

The report highlights the potential of regions with growing middle-class populations and rising consumer confidence.

Why the Reset Is Critical

The luxury market's reset has been driven by both internal and external pressures. Internally, brands realized that excessive pricing had alienated key demographics. Externally, macroeconomic factors, such as inflation and geopolitical instability, have made consumers more cautious. Companies like LVMH, Richemont, and Burberry have shown early signs of recovery, fueling optimism that the industry may have bottomed out.

China, a vital market, is expected to see a modest improvement in early 2026, though d'Arpizio noted that double-digit growth is unlikely given ongoing economic headwinds like a property crisis and high youth unemployment. Local competitors are gaining traction, challenging European brands for market share.

Risks to the Outlook

Despite the positive outlook, several risks could dampen the recovery. The Chinese economy, which has long been a growth engine for luxury brands, is still grappling with a deepening property crisis and weak consumer confidence. This has led to a shift in consumer behavior, with more buyers opting for domestic labels that offer similar quality at lower prices.

Bain & Co. estimates that China's luxury market shrank by as much as 20% last year, its steepest decline in over a decade. While there are glimmers of recovery, the sector remains cautious. Global brands like Gucci and Michael Kors have seen online sales in China drop sharply, while local competitors like Laopu and Mao Geping have gained market share.

What This Means for Investors

For investors, the luxury goods market's recovery presents both opportunities and cautionary signals. The market is expected to benefit from strategic partnerships, technological advancements, and a focus on sustainability. For example, Bain Capital's recent acquisition of Concert Golf Partners signals confidence in the long-term growth of lifestyle and luxury-related sectors.

At the same time, investors must remain mindful of the growing competition and changing consumer preferences. The rise of C-Beauty brands and local fashion labels is redefining the luxury landscape, particularly in key markets like China. While European brands still dominate, they must adapt to stay relevant. Brands that focus on innovation, affordability, and sustainability are likely to thrive in this evolving environment.