Kearney Report: Luxury sector shifts to stabilisation, not decline

Kearney’s latest '2026 Global Luxury Industry Outlook' report suggests the global luxury sector is moving into a period of stabilisation instead of a decline, as brands address slower growth, shifting consumer expectations and continued economic uncertainty.

The consultancy firm forecasts luxury market growth of 2 to 4 percent in 2026, below wider industry estimates of 3 to 5 percent, with performance expected to vary significantly across regions, product categories and consumer groups. According to the report, 2025 marked “a year of recalibration” for the industry, following a period of aggressive price increases, operational restructuring and creative change across major luxury houses.

Kearney stated that the luxury market is “normalising, not declining structurally”, with brands now focused less on scale and speed, and more on “creative clarity and consumer engagement”.

Fragmentation in global market growth

The US, Europe and China were cited as key regions in maintaining global luxury demand in 2026, continuing to provide the “scale, infrastructure, and client concentration that anchor global luxury demand”. Kearney noted, however, that each market is evolving differently.

In Europe, for example, growth is expected to remain fragile as brands tackle rising retail rents, regulatory pressures and cautious consumer spending. The report said aspirational consumers are increasingly delaying or trading down on purchases, while high-net-worth clients remain active.

In China, the firm said the market has stabilised following volatility in 2024, yet is unlikely to return to the double-digit growth reported in previous years. Spending remains concentrated among wealthier consumers, while categories tied to experiences and jewellery continue to perform strongly.

The US market, meanwhile, continues to be influenced by what Kearney described as a “K-shaped dynamic”, in which affluent consumers continue spending while aspirational shoppers become more selective. The report stated that consumers across income groups are becoming increasingly sensitive to unbalance between price and quality.

Alongside the three largest luxury regions, Kearney highlighted Japan, Southeast Asia and the Middle East as markets expected to outperform in 2026. In Japan, growth is more broadly tied to tourism, hospitality and premium retail experiences, while Southeast Asia is seeing rising demand from younger affluent consumers entering luxury for the first time.

Jewellery and experiential luxury expected to be strongest performers

Across categories, the report pointed to jewellery and experiential luxury as the strongest performers. Jewellery was described as “structurally stronger” than leather goods and ready-to-wear, benefiting from longevity and value perception, with brands reported to have achieved growth between 6 and 14 percent in 2025.

Handbags also proved a strong category, with prices rising by as much as 10 percent over recent cycles, outpacing apparel and footwear prices which declined 5 to 7 percent.

Experiential luxury also continued to accelerate, particularly across hospitality, dining and wellness, with consumers said to be increasingly prioritising purchases that feel “emotionally resonant” or “investment-worthy”, while brands are expanding into lifestyle-led experiences beyond products alone.

Looking ahead, hotels and fine dining are projected to grow by around 8 percent CAGR through 2028, while jewellery is expected to follow closely behind at approximately 7 percent CAGR. This contrasts ready-to-wear and leather goods, which are forecast to remain in low single-digit growth.

The report also linked the ongoing luxury reset to widespread creative leadership changes across the sector. According to Kearney, luxury brands saw “three times as many changes of creative directors than previous years” during 2025, as houses like Chanel, Gucci and Dior looked to “reinvigorate brand narratives and product direction”.

Luxury consumers now account for almost half of total industry spending

Consumer behaviour is another area that continues to shift, with Kearney finding that the top 2 percent of luxury consumers now account for almost half of total industry spending, while aspirational consumers are becoming increasingly selective about when and where they engage with luxury brands.

According to consumer research, 73 percent of respondents said price increases had caused them to pull back on luxury spending, while 36 percent said they were buying less often or feeling less excited about luxury overall and 63 percent still defined luxury primarily through quality and craftsmanship.

Conflicting behaviours were also found between product-led and experience-led luxury consumers; the former being more likely to reduce purchase frequency or turn to resale and second-hand platforms, while the latter were more inclined to switch between luxury brands or trade down within categories in order to maintain participation.

AI was another major focus of the report, with Kearney describing the technology as becoming part of the “core element of the luxury goods infrastructure”, embedded across forecasting, design, supply chains, customer service and personalisation.

According to the report, 90 percent of luxury fashion executives believe AI-driven personalisation is becoming essential for brands, while 60 percent of consumers are expected to use AI shopping agents in 2026. Kearney added that competitive advantage would pivot towards brands that “industrialise AI in the background while keeping creative decisions in the hands of people”.

Summarising its outlook for the year ahead, Kearney stated that “2026 will not reward scale or speed alone—but clarity, discipline, and relevance sustained over time”.