Luxury goods recovery seen in 2027: Goldman Sachs

Luxury goods industry forecasted to rebound in 2027, with US potentially emerging as a growth market according to Goldman Sachs. The luxury goods sector has been grappling with various challenges such as China's prolonged property market slowdown, US tariffs in 2025, volatile equity markets, higher interest rates, US midterm elections, the Middle East conflict and geopolitical tensions affecting consumer spending.

However, the report attributed the slowdown primarily to sharp price increases following the Covid-19 pandemic, which saw traditional high-end luxury brands' prices rise by an estimated 60 per cent between mid-2019 and mid-2026. This led to a decline in consumer interest, low store traffic and a lack of innovation in the post-Covid period.

Despite these challenges, several luxury companies have appointed new CEOs and creative directors aiming to revive consumer interest. The report predicts a 7% revenue growth for a basket of large, publicly traded luxury-goods makers in 2027. The US market, known for its wealthy consumers, is seen as a potentially bright spot for luxury goods with American consumer appetite for such products picking up.

This shift in consumer behavior could be attributed to a possible guilt factor or outlet culture that discouraged luxury spending despite their wealth, but this trend has begun to change since the Covid-19 pandemic.

Goldman Sachs outlined seven key factors, known as the seven Cs, determining the growth of luxury brands. Larger luxury brands have an advantage due to better store locations and lower rent expenses. Certain product categories such as jewellery show stronger growth potential than others like beauty products. Another crucial factor is the spending power of wealthy consumers who are less affected by economic slowdowns, thus making high-end luxury brands more resilient.

Creativity, consistent brand identity, recognisable designs, and strong company ownership and management structures were also highlighted as significant factors contributing to luxury brand success, especially considering the prevalence of family-owned and family-run luxury businesses.