Why Luxury Goods Companies’ Revenues Are Forecast to Climb

The outlook for luxury brands is improving after several years of lackluster performance, according to Goldman Sachs Research.

A basket of large, publicly traded luxury-goods makers is forecast to increase revenue by 7% in 2027, Erwan Rambourg, head of Europe Luxury and Lifestyle in Goldman Sachs Research, writes in a report. This is an improvement from an expected 6% growth rate in 2026, when the sector came out of several years of weaker performance.

“We view this as a solid recovery for an industry that has faced a prolonged period of sluggish performance,” Rambourg writes.

The market capitalization for luxury-goods stocks increased in 2022, after the stock market swoon caused by the Covid pandemic. Luxury stocks benefited from “exuberant spending,” Rambourg notes, but this was followed by a period of aggressive price increases and a slower pace of innovation from the sector.

What is the outlook for luxury goods companies?

Luxury-goods makers’ share prices have fallen over the past three or four years, but so have earnings estimates, according to Goldman Sachs Research. The result is that valuations do not look particularly attractive, and they also don’t appear stretched. “But we think valuation alone is rarely a catalyst for investors to buy or sell shares in the sector,” Rambourg writes. “Instead, it is more a function of sales momentum, which we see picking up soon.”

Why luxury goods sales have been sluggish

The industry has faced multiple challenges. China’s ongoing property slump, US tariffs in 2025, jittery equity markets, upcoming midterm elections and higher rates, as well as the ongoing Middle East conflict and other geopolitical tensions have weighed on spending decisions.

“There have been many reasons for consumers to cancel or delay purchases of discretionary products,” Rambourg writes. Still, these broader factors probably haven’t been the main constraint, he says, attributing the weak performance in recent years mostly to “a degree of strategic inertia” among luxury brands.

Price hikes after the Covid pandemic, which were perceived as excessive by some observers, likely played a larger role in the slowdown in growth for luxury goods. More affordable luxury brands benefited as traditional high-end names hiked prices—estimated at around 60% between mid-2019 and mid-2026—opening space in the market that they could fill, according to Goldman Sachs Research.

“As a direct impact of elevated price points and a value proposition that became less compelling across many brands, it appears that many target consumers decided to pass on purchasing luxury goods,” Rambourg writes.

Alongside the aggressive price increases, limited innovation by the industry in the post-Covid period led to diminished consumer interest, and store traffic tailed off. That said, a number of luxury companies have new CEOs and creative directors who started presenting their collections last year. “We believe that it likely takes three to four collections for consumers to recognize—and possibly buy into—the change,” Rambourg writes.

Why the US may still be an emerging market for luxury

For many years there has been “a surprising disconnect between wealth in the US (high) and luxury demand among American consumers (low),” Rambourg points out. The market was likely restrained by a “guilt factor” or by “outlet culture,” he says. However, behaviors have begun to change since the Covid pandemic.

“The appetite of American consumers for luxury goods has picked up strongly,” he writes. Luxury brands have taken notice, and store openings are multiplying.

“While it may sound counterintuitive, we still think the US is an emerging market for luxury goods,” he adds.

Elsewhere in the world, South Korean demand growth may be somewhat fragile because it is linked to wealth in the country’s tech-heavy and volatile equity market. The importance of Hong Kong for luxury brands has diminished over time, but the market is showing signs of recovery, with both local consumers and visitors from mainland China supporting sales growth, according to Goldman Sachs Research.

The luxury goods companies Goldman Sachs Research covers have recorded average top-line growth of 6% annually over the past 25 years.

“While growth has been pedestrian of late,” sales levels exceed what a 6% compound annual growth rate (CAGR) would have implied since just before the Covid pandemic in 2019, Rambourg points out. “In other words, the bear argument that the sector may have gone ex-growth for an extended period is not one we agree with,” he writes.

What is the longer-term outlook for the luxury goods sector?

To help understand where the sector and individual luxury goods makers may be headed, the report includes a benchmarking framework. This provides a way to think about long-term growth drivers, broken down as seven Cs.

One of the Cs is clout, and Rambourg posits that “big is beautiful” in the luxury sector. He notes that bigger brands not only tend to secure better locations, but they also benefit from lower rent as a percentage of sales. Another is categories, with some consumer verticals, such as jewelry, having better growth potential than others, such as beauty products.

Other considerations in the framework include: consumer caliber, referencing the relative resilience of high-net-worth consumers, which can likewise make high-end brands more resilient; and creativity, which may be difficult for equity analysts to quantify but does come into play in assessing prospects for luxury companies.

Rounding out the list are consistency, which gets to the clarity of brand positioning; codes and icons, which are not necessarily loud logos but can be a discreet symbol, pattern, or logo only identifiable by people who know the products well; and finally, corporate considerations, as many luxury-goods companies are partly owned and run by family members. 

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