Luxury brands have witnessed three decades of unprecedented growth. In April 2023, LVMH, home to the likes of Givenchy and Guerlain, even briefly became Europe’s most valuable company.

Since then, most luxury giants have lost momentum. Estée Lauder’s stock price has shed 35% since the start of 2024. Hermès has lost 34% so far this year, and shares in Richemont, owner of Cartier and Chloé, have yo-yoed and are now down 15%.

Luxury’s troubles are not cyclical; they are structural. The hard truth is this: The playbook that made luxury successful is becoming its handicap.

First, luxury is suffering from an innovation recession. Brands increasingly rely on heritage and iconic products rather than creating the next generation of desirable goods. The Hermès Birkin bag, for example, was created in 1984. In 2023, Bernstein estimated that with the Kelly bag, another 1977 icon and a rebrand of a bag invented in the 1930s, these two models accounted for more than 13% of the brand’s annual revenue. The question is: Can one endlessly thrive on products that were created for our ancestors?

Second, luxury created a reputational recession. Post-COVID price increases far outpaced any increase in functional value. With societies increasingly polarized economically, and stricken by repetitive inflationary costs, the sector has lost 70 million consumers between 2022 and 2025, according to Bain’s estimate . Meanwhile, there is only so much that billionaires want to buy. In fact, the super wealthy are more interested in buying one-of-a-kind experiences, say, a house on the most pristine coast in the world, that reduce other billionaires’ ability to buy them, than “artificially rare” luxury products.

Source link