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Europe’s luxury is back in fashion: is the comeback real?
Ruben Dalfovo
Investment Strategist
Key takeaways
From laggard to catch-up mode, luxury stocks are turning higher.
European luxury stabilises as China steadies and full-price selling returns.
Wholesale cuts and cleaner inventory support margins into the holiday quarter.
The rebound in Europe’s luxury names is gathering speed as green shoots appear in China and brands refocus on full-price selling. Here is what is changing, why it matters, and what to watch next.
The signal returns
Europe’s luxury story went soft through early 2025 as tourists slowed and China’s property chill weighed on aspirational buyers. Since mid-October the tone has shifted. LVMH reported its first quarter of growth this year, with group sales up 1% in Q3 2025 as China steadied and fashion and leather goods improved from a deeper fall in Q2.
Hermès kept compounding with about 10% Q3 growth at constant exchange rates, helped by strong Americas and resilient Europe. Richemont’s jewellery houses remained the defensive anchor earlier in the year, with double-digit growth offsetting weaker watches. Kering is still in rebuild mode, yet Q3 showed clear sequential progress. Taken together, the sector has a firmer floor.
Clean channels and the full-price test
One reason the comeback feels different: management teams are leaning into full-price sell-through. That is retail speak for selling at original ticket, not discounting. It protects brand equity and margins. Kering’s Q3 deck shows comparable retail sales down 13% year on year, better than Q2 (-23%), and wholesale cut by 25% to clean channels ahead of new launches at Gucci.
LVMH and Hermès also stressed tight control on product mix and cadence. For investors, the unit economics are simple. High full-price sell-through plus lower markdowns equals healthier gross margin, lower inventory risk, and fewer nasty surprises. If this discipline holds into the holiday quarter, guidance risk falls.
China steadies, the pyramid widens
Luxury demand is a pyramid. At the top sit ultra-high-net-worth clients who barely flinch at macro cycles. In the middle are loyal repeat buyers. At the base are aspirational shoppers who are most sensitive to growth scares, travel frictions and currency swings. Recent prints suggest the base is stabilising in China and travel retail, while the top keeps spending.
Hermès flagged a slight improvement in China. LVMH cited better momentum in Asia. Richemont’s high jewellery stayed robust, which is usually the first sign that confidence at the top remains intact. For portfolios this mix matters. A healthy pyramid supports steadier cash flows, cleaner inventory, and less promotional noise into year-end.
Creativity, cadence, and pricing power
Luxury is a creative business built on scarce product and cultural heat. New creative directions at marquee houses are landing on shop floors, supported by more measured price increases after a heavy cycle in 2022–2024. The cadence is improving: leather goods refreshes, tighter collections, and clearer storytelling.
Richemont’s jewellery maisons again showed why scarcity and heritage convert into pricing power. Kering is rebuilding brand heat at Gucci with newness in leather goods and a tighter network. The common thread is execution. Dates and delivery windows matter more than slogans. Watch how quickly collections move from runway to retail, and how many pieces sell at full price in the first eight weeks.
What could derail the rebound
China could wobble again, especially if property or travel slow. U.S. tariffs or currency swings could dent tourist flows and margins. A surprise in U.S. rates would challenge globally exposed quality stocks. Early warning signs include rising markdowns, longer inventory days, and weaker commentary on mainland demand or tourist conversion.
Investor playbook:
Track sell-through and markdowns in Q4 trading updates. Rising promotions are a red flag.
Watch China and travel retail colour on monthly calls and duty-free channels.
Follow cadence: delivery dates, store productivity, and the pace of new leather goods.
Revisit the Saxo Luxury theme as a portfolio tool to express a selective view across leaders with pricing power and clean balance sheets (for inspiration only).
From green shoots to a trend
The next test is simple. Keep selling at full price and keep China steady. If both hold, today’s bounce can turn into a durable trend. Full-price sell-through protects margins and brand heat. Cleaner channels and tighter collections reduce inventory risk. A steadier China base lifts travel retail and the aspirational buyer.
Store productivity and early sell-through on new leather goods become the live reads. Do that for two quarters and guidance risk falls. Pricing power then reasserts itself, helping cash flow and buybacks. In short, if discipline and demand align, Europe’s luxury recovery can move from green shoots to a trend.
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The instrument(s) referenced in this content may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and options.