Luxury Sector Faces Bifurcated Future: Hard vs. Soft Goods Divide

Luxury market analysts are optimistic about a return to growth in 2026, following a challenging period of sales declines. This recovery is expected to be driven by increased Chinese consumer confidence and ongoing product innovation. However, companies will likely see vastly different results based on their exposure to various customer segments. Hard luxury items, including high-end jewelry and watches, are performing robustly, signaling resilience among the ultra-wealthy.

Conversely, 'soft luxury' goods, encompassing items like leather goods, handbags, and apparel, are facing significant headwinds. The "aspirational luxury buyer," who previously saved for high-value purchases, has notably decreased. This demographic shift creates a polarized market where companies catering to the ultra-affluent are expected to outperform those reliant on broader consumer spending power.

Analysts predict that macroeconomic volatility and uncertainty surrounding the wealth effect will further accentuate this performance gap. While some brands are identified as strong turnaround stories, risks remain, particularly concerning execution and potential market corrections. The recovery in China, though showing signs, is still considered fragile, and global consumer fatigue with post-pandemic pricing strategies presents another challenge for the sector.