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The global luxury goods industry is expected to witness a recovery after several years of sluggish sales performance, with revenues of major listed luxury brands projected to grow by 7 per cent in 2027, with the US likely remaining the bright spot, according to a report by Goldman Sachs.
Goldman Sachs noted that the luxury goods industry has faced several challenges, including China's prolonged property market slowdown, US tariffs in 2025, volatile equity markets, higher interest rates, upcoming US midterm elections, the ongoing Middle East conflict and broader geopolitical tensions, which have affected consumer spending decisions. However, the report highlighted that sharp price increases following the Covid-19 pandemic likely played a larger role in the slowdown in growth for luxury goods. Prices of traditional high-end luxury brands rose by an estimated 60 per cent between mid-2019 and mid-2026, creating opportunities for more affordable luxury brands to attract customers.Along with this, the aggressive price increases, limited innovation by the industry in the post-Covid period led to diminished consumer interest, and store traffic tailed off, GS said. However, several luxury companies have appointed new CEOs and creative directors, who began showcasing their collections last year, signalling efforts to revive consumer interest. "A basket of large, publicly traded luxury-goods makers is forecast to increase revenue by 7% in 2027," it said. Meanwhile, the report highlighted the US as a potential growth market for the luxury goods industry, noting that the appetite of American consumers for luxury goods has picked up strongly. US has become a surprising bright spot for luxury goods, with behaviour shifting in a market where buying habits have not fully reflected the significant number of wealthy consumers, it said. For several years, there had been a surprising disconnect between wealth in the US (high) and luxury demand among American consumers (low). This gap is partly attributed to a possible guilt factor or outlet culture, which may have discouraged luxury spending despite high levels of wealth. However, consumer behaviour has begun to change since the Covid-19 pandemic, indicating growing demand for luxury products in the US. Overall, Makers of luxury goods are poised for faster revenue growth after several years of sluggish sales. Looking at longer-term prospects, Goldman Sachs outlined seven key factors, known as the seven Cs, that could determine the growth of luxury brands.It noted that larger luxury brands generally have an advantage because they can secure better store locations and spend a smaller share of their sales on rent. Also, some product categories, such as jewellery, offer stronger growth opportunities than others, including beauty products. Another important factor is the spending power of wealthy consumers, who are generally less affected by economic slowdowns, making high-end luxury brands more resilient. The report also emphasised creativity, consistent brand identity and recognisable designs or symbols that help luxury brands stand out. It further highlighted the importance of company ownership and management structures, particularly as several luxury businesses remain family-owned or family-run. (ANI)
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