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European luxury goods companies are positioned for a meaningful recovery in 2026 after two challenging years marked by stagnant sales and an estimated 20% drop in earnings, according to a new UBS sector outlook. The investment bank projects that organic sales will grow around 5% in 2026, bouncing back from flat results expected in 2025. Earnings per share are forecast to rise 12% next year following a steep 12% decline in 2024, signaling renewed momentum for the global luxury sector.
UBS also expects the weighted average EBIT margin to improve to 21.3%, reversing a 510-basis-point compression suffered between 2023 and 2025. A key driver of the rebound is stabilizing Chinese consumer demand. Chinese shoppers, who are projected to account for roughly 26% of luxury sales in 2025, are showing early signs of recovery after a year of weakness. The industry has responded by refreshing creative direction across 15 major brands—nearly double the number of changes made in 2024—and reintroducing more accessible entry-level pricing to support demand.
Volume growth is expected to turn positive at 3% in 2026 after two years of declines, while price increases are projected to contribute about 2%—well below the aggressive hikes seen in 2022 and 2023. American consumers, representing around a quarter of sector sales, are anticipated to outperform with 7% growth, contributing more than one-third of the industry’s expansion. Europe is projected to grow 6%, and Japan about 4%, although tensions between China and Japan may limit tourist spending.
UBS also highlights a shift away from the “quiet luxury” trend toward more expressive, pattern-driven designs, which has recently boosted brands such as Missoni and Pucci. Jewelry continues to gain share, rising from 15% of sales in 2021 to 18% in 2024, while leather goods have slipped to 44%. UBS maintains a positive outlook on Richemont and LVMH, while trimming Prada to Neutral and upgrading EssilorLuxottica to Buy. The firm notes that while recovery is underway, meaningful earnings acceleration is more likely to materialize in the second half of 2026.
