Luxury goods industry to bounce back by 2027: Goldman Sachs
What's the story
The global luxury goods industry is set for a major recovery by 2027, according to a report by Goldman Sachs. The study predicts that revenues of major listed luxury brands will grow by 7% in the coming years. The United States is expected to remain a bright spot for this growth, despite challenges such as China's property market slump and US tariffs in 2025.
Market challenges
Price hikes post-COVID-19
The report highlights that sharp price increases after the COVID-19 pandemic have significantly contributed to the slowdown in luxury goods growth.
Traditional high-end luxury brands saw their prices rise by an estimated 60% between mid-2019 and mid-2026.
This has opened doors for affordable luxury brands to attract customers, as Goldman Sachs noted "the aggressive price increases, limited innovation by the industry in the post-Covid period led to diminished consumer interest, and store traffic tailed off."
Leadership changes
Leadership changes in luxury companies
In a bid to revive consumer interest, several luxury companies have appointed new CEOs and creative directors.
These leaders started showcasing their collections last year, signaling a fresh approach toward attracting customers.
Goldman Sachs's report states that "a basket of large, publicly traded luxury-goods makers is forecast to increase revenue by 7% in 2027," highlighting the industry's potential for recovery amid these leadership transitions.
Market potential
US as a growth market
The report also highlights 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."
There was once a surprising disconnect between wealth in the US and luxury demand among American consumers.
This gap is partly due to a possible "guilt factor" or "outlet culture," which may have discouraged luxury spending despite high levels of wealth.
Growth determinants
Seven 'Cs' of luxury brand growth
Goldman Sachs identified seven key factors, dubbed the "seven Cs," that could determine the growth of luxury brands.
These include store location advantage for larger brands, product category growth potential (jewelry over beauty products), spending power of wealthy consumers who are less affected by economic slowdowns, and creativity/consistent brand identity.
The report also stressed company ownership and management structures as important factors in this industry.