Luxury Isn’t What It Used to Be but That Could Be a Chance to Buy
Luxury goods used to be a sure-fire winner for investors and shoppers alike. Prices kept climbing, limited editions flew off the shelves, and even the resale market felt like a gold rush. But lately, that old magic seems to be fading.
Sure, luxury brands like Hermès still sell Birkin bags for mind-blowing sums, and Gucci, Chanel, and LVMH remain household names in fashion. Yet, their stock prices tell a different story — many luxury stocks have taken a heavy hit, with some losing nearly half their value.
So, what’s going on? Is luxury losing its shine, or is the market just getting it wrong for now?
Why Luxury Shoppers Are Changing and What That Means
Let’s break down what’s behind the slump.
First, brands raised prices aggressively during the pandemic to maintain exclusivity. But when inflation kicked in and people started going out more, many middle-tier buyers were priced out.
Then there’s the China factor. The much-anticipated “revenge spending” hasn’t quite materialized, and consumer sentiment there remains cautious.
On top of that, some brands are struggling with less exciting product lines, and increasing tariffs—especially on European luxury goods—are raising costs.
Basically, the aspirational consumers who used to fuel growth aren’t as active anymore. Those buying bags as a “statement” might be stepping back.
But The Wealthy Are Still Buying and That Matters
Here’s the key: true luxury buyers are the ultra-wealthy, and they haven’t gone anywhere.
These folks don’t change their spending habits just because the economy wobbles. In fact, thanks to recent tax cuts and rising stock markets, their pockets are even deeper.
According to the Congressional Budget Office, recent legislation essentially gave high earners a 2.3% tax cut. Combine that with a strong market, and the richest customers remain confident.
This group is the backbone of luxury brands, keeping the engine running even when others hesitate.
Stocks Are Cheaper Than They’ve Been in Years
From an investment point of view, this might be the best part.
Luxury stocks are trading at some of their lowest valuations in over a decade:
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Prada’s price-to-earnings ratio for 2026 earnings is just 14 times
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LVMH trades below 20 times
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Moncler, Kering, and Richemont hover just above 20 times
Historically, when luxury valuations drop this low compared to the broader market, the sector tends to outperform in the following months—often by a significant margin.
Put simply, the stocks may have been oversold and could be due for a bounce.
Which Brands Look Like Winners
Not all luxury stocks are created equal. Here are some standouts:
Hermès
The undisputed leader with iconic Birkin and Kelly bags. Sales are expected to grow 9% this quarter—a rare bright spot among luxury peers. Its market value recently surpassed LVMH’s, showing how strong its position is.
Richemont
The Cartier parent company, known for its jewelry and watches, just posted record quarterly sales. Analysts say it can raise prices without losing customers, thanks to strong brand loyalty.
Burberry
After some missteps, Burberry is returning to its British roots and refreshing its brand. Its stock is up nearly 40% this year, signaling a potential turnaround.
Coach
Coach has moved upmarket successfully, shedding its discount store image. It’s still priced attractively compared to European luxury giants, offering room for growth.
What I Think About Luxury Stocks Now
This shakeout in luxury is a healthy correction.
The “everyone-can-afford-a-little-luxury” wave of recent years is giving way to a more focused market. The winners will be those with strong brand power, loyal customers, and pricing strength.
My view is that luxury stocks now offer more upside than downside, but it’s important to be selective—stick with the clear leaders and brands that have proven their ability to adapt.
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