Luxury’s Lost Luster: Brands Grapple With Shifting Tastes, Economic Headwinds

As 2025 unfolds, the luxury market is undergoing a period of mixed results and shifting dynamics. Recent news and earnings reports reveal a sector experiencing notable evolution, per a ModernRetail report, requiring flexibility and strategic adjustments from its key players.

While some leading brands, like LVMH, continue to experience growth in certain segments such as fashion and cosmetics, others, like Burberry, are struggling with weaker performance in key markets. High-income consumers remain a critical source of demand, but they are becoming more price-conscious, seeking greater value and quality in their luxury purchases.

During LVMH’s recent earnings call, CEO Bernard Arnault said the luxury industry is in the midst of “highly turbulent times.”

Meanwhile, Claudia D’Arpizio, Bain & Company partner and leader of its global Fashion & Luxury practice, wrote in a report the shrinking luxury consumer market should prompt brands to reconsider the value they provide, focusing on personalization and using technology at scale.

“To win back customers, particularly the younger ones, brands will need to lead with creativity and expand conversation topics,” D’Arpizio wrote. “Simultaneously, they must keep their top customers front and center, surprising and delighting them while rediscovering one-to-one human interactions.”

This evolving landscape reflects larger economic pressures, such as inflation and geopolitical instability, which are impacting consumer confidence and spending habits across regions. While luxury brands continue to rely on their ability to adapt to new trends and maintain brand appeal, the market remains unpredictable. Companies must stay agile to manage changing consumer preferences and market conditions, balancing growth with caution as they prepare for the future.

Analysts expect minimal growth for the luxury sector until at least 2027. But some regions are projected to see expansion in 2025, particularly Japan, the Middle East, and India, with the latter expected to experience 15%-20% growth. Key trends shaping the luxury industry in 2025 include:

• Moving toward experiential and wellness-focused travel in luxury hospitality.
• Emphasis on sustainability and cultural connections, with trends like “quiet luxury” gaining traction.
• Increased relevance of the resale market, driven by consumer desire for budget-conscious shopping.

The industry faces an “existential crisis,” according to some experts, with changing values among younger consumers forcing luxury brands to adapt their strategies and cultural positioning.

This shift in consumer behavior is evident at Capri Holdings, parent company of Michael Kors, Versace and Jimmy Choo. Despite expectations for fiscal 2025 revenue to reach $4.4 billion, Capri’s recent $600 million write-down of Versace and Jimmy Choo’s value underscores deeper challenges, per a Wall Street Journal report. These struggles, compounded by the failed merger with Tapestry, have led to significant losses in both revenue and market share, especially as the company grapples with repositioning its brands.

Versace’s attempt to elevate the brand with more sophisticated pieces alienated some customers, resulting in a 15% drop in revenue. Meanwhile, Michael Kors faced criticism for alienating its core audience by overpricing and focusing too heavily on fashion items. Capri is now working to recalibrate its brands, including introducing lower-priced items and reducing Kors’ clothing prices.

Gucci is facing similar challenges. After a two-year tenure, creative director Sabato De Sarno parted ways with the brand, which has been struggling with stagnating demand, particularly in China. His shift toward more timeless looks failed to resonate with consumers, resulting in a 26% drop in revenue in Q3 2024.

Meanwhile, Ralph Lauren’s third-quarter revenue for fiscal 2025 increased 11%, to $2.1 billion, driven by strong global performance across regions and channels, exceeding expectations. The company saw notable growth in direct-to-consumer sales, with a 12% increase in comparable store sales, and continued expansion in key markets like Europe, Asia and North America, with China up more than 20%.

Third-quarter highlights included growth in customer acquisition and loyalty, adding 1.9 million new consumers to its direct-to-consumer business, elevating brand consideration, purchase intent, and net promoter scores, while increasing its social media following to over 64 million, a low double-digit rise from the previous year.

This focus on expanding the consumer base aligns with trends in payment preferences. According to a PYMNTS Intelligence report, “New Data: Defining the New Buy Now, Pay Later Consumer,” one third of higher-income consumers, those earning more than $100,000 annually, have used buy now, pay later (BNPL) services, with 25% of them choosing BNPL as a preferred payment option rather than out of necessity.

As brands focus on diversifying their consumer base, 2025 marks a shift toward recognizing the potential of older consumers. This demographic, which has long been overlooked in favor of younger, trend-driven shoppers, now controls most global wealth, positioning them as a stable and valuable market for luxury goods.

Bellamy Grindl, Retailytics principal and founder, recently told PYMNTS that “this has long been a missed opportunity for the luxury market. Older generations not only have more disposable income but are also less price-sensitive and highly brand-loyal. They value quality and heritage, which aligns perfectly with what luxury brands offer. The problem is many feel ignored because media and marketing remain hyper-focused on younger audiences. By prioritizing youth, brands risk alienating a demographic that’s eager to invest in their products.”

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