What's Happening?
The luxury sector experienced a modest growth in the third quarter of 2025, driven by gains in the US stock market and a stabilization in China's economic conditions. LVMH, a key player in the luxury market, reported better-than-expected sales, with group
sales increasing by 1% to €18.28 billion. This led to a significant 12% rise in its share price on October 15. Other luxury brands like Kering and Ferragamo also exceeded consensus expectations, contributing to a strong market rally. Despite these positive developments, experts like Morgan Stanley's Édouard Aubin caution that the sector is experiencing stabilization rather than fundamental improvement, particularly in Asia. The US market has been a major driver of growth, benefiting from eased trade tensions and record-level equities. However, the performance in China remains mixed, with some companies like Prada observing a plateau in consumer demand.
Why It's Important?
The modest growth in the luxury sector is significant as it reflects broader economic trends and consumer confidence in key markets like the US and China. The US market's contribution to luxury sales highlights the importance of American consumers, who account for approximately 22% of total luxury spending. The stabilization in China, although not a full recovery, is crucial for the sector's future prospects, given China's substantial influence on global luxury demand. The positive earnings reports from major luxury brands may alleviate investor concerns and skepticism that have persisted over the past year, potentially leading to increased investment and market confidence.
What's Next?
Looking ahead, the luxury sector will closely monitor consumer demand trends in China and the US. Companies may adjust their strategies to capitalize on the stabilization in China and the robust US market. Investors will be keen to see if the positive momentum in Q3 can be sustained, particularly as geopolitical and economic uncertainties continue to pose challenges. The sector's performance in the upcoming quarters will be pivotal in determining long-term growth trajectories and investment strategies.
