Glitzy runway shows by the world’s biggest fashion brands in Milan and Paris mask a worrying picture for luxury executives behind the scenes – a slowdown that appears to be getting worse as war in the Middle East rages on.
Investors are increasingly concerned about luxury brands' growth prospects as sector recovery remains elusive, with the inflationary effects of the Middle East conflict squeezing shoppers' budgets at a time when their enthusiasm for high-end handbags was already fading.
Shares in Gucci owner Kering have erased all the gains made when CEO Luca de Meo took the helm a year ago. LVMH , the biggest luxury group, is down 37% since the start of 2026.
Luxury brands under pressure
"I believe this year and next year will likely be a holding period while the market stabilises and becomes more predictable again," Diego Della Valle, chairman of luxury brand Tod's, told reporters in Milan on Friday (Sept 18).
Luxury brands are under more pressure to entice shoppers with new designs and to show a return on the investment into runway shows that industry experts say can cost as much as €10mil (approximately RM46.6mil) to stage.
Read more: Milan Fashion Week runways stay bright as luxury fashion finds its footing
Studies by Bain and other consultancies have found middle-class shoppers are spending less on luxury products.
That has served to increase competition for the wealthiest shoppers, with brands ramping up investment in stores, services and exclusive experiences even as sales decline.
"There is strong polarisation among brands: fewer than half are growing, while the rest are losing ground," said Federico Bazzani, partner at Deloitte Advisory.
"Brands face a choice: either invest in innovation, customer experience and cultural relevance to justify their price positioning, or revise their pricing and accept lower margins."
Prada, which opened Milan Fashion Week with its runway show on Tuesday (Sept 22), recently revamped its Milan flagship store with private spaces designed for the biggest spenders.
Luxury groups are in a bind after hefty price hikes have made even the wealthiest clients more concerned about value for money, said David Watts, a luxury business adviser in London.
"They don't want to reduce prices because that says we were overcharging you, and it loses them margin, but they don't want to reduce production because that's going to hit revenue."
Read more: Not a one-hit wonder? Why designer Dario Vitale’s fashion comeback is a big deal
Consumer preferences shifting?
Industry insiders have also started talking more openly about consumer preferences shifting.
It's one of the reasons Renzo Rosso, chairman of Diesel owner OTB, does not see an imminent recovery for the sector.
"Consumers are changing," he said at a conference in Milan on Monday (Sept 21), adding that shoppers are increasingly prioritising spending on wellness, health and longevity, as well as hotels and restaurants.
Gucci, Dolce & Gabbana and Giorgio Armani are showing their latest collections this week in Milan while LVMH's flagship brands Dior and Louis Vuitton will be among the most closely watched shows at Paris Fashion Week, which kicks off on Sept 28.
Chanel, which has outpaced rival brands thanks to the successful new designs of creative director Matthieu Blazy, will show its Spring/Summer 2027 collection on Oct 5. – Reuters
