Luxury is thriving in a world where most people are cutting back. In the first quarter of 2025, LVMH, Hermès, and Richemont all posted better-than-expected earnings, expanding their footprints even as global retail indicators showed signs of contraction. This paradox—rising performance in the upper tier of the market despite macroeconomic pressure—highlights a growing divide not just in wealth, but in strategy.
While middle-income consumers are tightening their belts due to persistent inflation and higher borrowing costs, ultra-wealthy shoppers remain largely insulated. According to Bain & Company, the global personal luxury goods market grew by 8% year-on-year in Q1, driven primarily by strong demand in the United States and a surprising rebound in China. The trend shows little sign of slowing, with estimates suggesting the market could top €400 billion by the end of 2025.
At the core of this resilience is the pricing power of luxury brands. Unlike mass-market companies, which are often forced to offer discounts or navigate price sensitivity, high-end retailers have the ability to raise prices without losing customers. In 2024 alone, Chanel reportedly raised handbag prices three times, and still experienced waitlists in major cities. These brands operate more like exclusive financial instruments than mere retailers—scarcity and status keep demand high.
Another factor is international diversification. Luxury companies are not as exposed to the struggling European consumer as traditional retailers are. With U.S. and Middle Eastern demand climbing, and Chinese tourists returning to global capitals, the customer base is both mobile and global. Online luxury sales, though slower than in previous years, remain stable and profitable due to high margins.
This success stands in contrast to much of the broader retail space. Department stores and fast fashion chains are cutting costs, closing locations, or pivoting to outlet models. Even previously resilient brands like Nike and Adidas have downgraded earnings forecasts due to inventory misalignment and slowing wholesale orders.
In effect, luxury has become its own economic cycle—one that runs counter to the rest of the market. The global middle class is under pressure, but the global upper class is thriving. This is not just a consumer behavior story; it is a strategic segmentation story. Brands that aligned early with the luxury model—emphasizing scarcity, brand narrative, and exclusivity—are now reaping the benefits.
The next article will explore how some companies are trying to enter the luxury space as a survival tactic—and whether it works.