Are luxury stocks worth investing in?

After a decade of prosperity and growth, enthusiasm among investors for the luxury goods sector has waned. Are Hermès, LVMH and others once again considered to be reasonably prices, or is luxury still expensive?

Luxury stocks have been on an impressive journey over the last decade. The share prices of companies such as LVMH and Hermès soared by hundreds of per cent, partly driven by the huge surge in demand from Asia and the United States. Today, both luxury brands can be found among Europe's five most valuable companies (source).

Recently, however, enthusiasm for the sector has tailed off. After years of relentless growth, several luxury stocks have seen a decline. As an example, LVMH – the world's largest luxury goods group – has seen its share price fall by more than 30% since its peak in 2023 (source). Furthermore, UBS also notes that the luxury goods sector is currently valued at its lowest level in fifteen years compared to the stock market as a whole (source).

The recent dip has created opportunities for those who have always wanted to invest in the luxury goods sector, but were put off by the price tag. You should bear in mind that 'reasonably priced' still isn't the same as 'dirt cheap', however. A large number of luxury stocks continue to trade at substantial multiples, meaning that companies must turn their growth stories into reality to justify the valuations.

Increasing global prosperity is the driving force

Nonetheless, the growth prospects for luxury stocks remain appealing. Rising global prosperity is creating a steadily growing market for affluent consumers. Asia, in particular, has seen unprecedented demand for luxury goods over the past decade, and estimates show that 25% of global spending on luxury goods can be attributed to Chinese consumers (source). The number of wealthy individuals is also increasing at pace, with China welcoming 141,000 new dollar millionaires in 2024 (source).

In the United States, too, the number of wealthy individuals continues to grow. The country had nearly 24 million millionaires in total and expects to add a further five million by 2029 (source). This is relevant because spending on luxury goods tracks the growth of wealth rather than GDP: the higher the number of newly wealthy people, the greater the potential demand. Emerging markets such as the Middle East and, in the longer term, perhaps India, could also boost demand.

Another positive aspect is that luxury brands typically hold significant pricing power. Many brands can raise the prices of their bags, jewellery and clothes each year without necessarily losing their client base (although there are limits, as we discuss below). What's more, luxury brands have been investing in new segments in recent years (such as LVMH, which entered the jewellery market with the acquisition of Tiffany & Co.) as well as in digital channels. Despite their exclusive image, luxury brands have learned to establish an online presence and engage with young customers on social media, all while maintaining an aura of exclusivity.

Competition from the pre-owned sector

The positive outlook does not ignore the fact that luxury stocks are also facing challenges. One such example is the growing online second-hand market, with platforms such as The RealReal and Vestiaire Collective.

Whereas consumers once sorted out their wardrobes, sold a handbag and used the proceeds to buy a new model from the luxury brand, this is becoming less and less common. Instead, an increasing number of shoppers are trading in their luxury items to buy second-hand products. This is diverting funds away from the primary market and putting luxury brands in an unfamiliar position. Not only are they competing with one another, but they're also going up against the stocks of Prada dresses, Chanel cardigans and Louis Vuitton bags that are already in people's wardrobes.

According to Bain, the second-hand luxury goods market accounted for around $56 billion in 2024 – almost three times as much as ten years ago. And that rather staggering amount is almost as much as the total turnover luxury brands make through department stores worldwide (source).

Other challenges

Secondly, the dependence on China represents a huge challenge. The Chinese market experienced years of significant growth, but saw sales of luxury goods fall by an estimated 18%-20% in 2024 (source). At present, Chinese consumers are experiencing a decline in confidence, partly due to issues in the real estate sector. While analysts anticipate that the Chinese luxury goods market will grow again after 2025 (source), it is clear that the era of double-digit growth in China may be behind us. Lastly, Chinese competition is becoming ever more significant. Although Western brands are currently the preferred choice, Chinese high-end brands are evolving rapidly.

A third, structural challenge is balancing exclusivity, growth and price. According to consultancy firm McKinsey, around 80% of the market growth between 2019 and 2023 came from price increases (source). The question now is how much leeway is left. Middle-class customers who may be saving up for a designer bag may think twice when prices rise. And although it is often said the super-rich will continue their spending irrespective of the economic climate, previous crises have shown that spending on luxury goods can indeed drop when times get tough. Here too, of course, there remains a distinction between the luxury brands that are right at the top (Hermès, Ferrari) and which intentionally create a sense of exclusivity, and the 'ordinary' luxury brands that have less pricing power during hard times.

Other risks are less obvious. Many luxury brands are European, yet a significant part of their revenue comes from other markets. And that means currency fluctuations can have a positive or negative impact on their earnings. Regulation and trade tariffs also pose a risk. Finally, luxury is both fashion and a question of taste. After all, brands can fall out of favour from one collection to another.

Which luxury goods companies are listed on the stock market?

The luxury goods sector is quite varied – ranging from haute couture and watches to champagne and sports cars – and not all players are of the same calibre. For investors, it makes sense to look at profitability, positioning and valuation. Below are some key players:

• Hermès is often seen as the crown jewel among luxury stocks. The French luxury goods house, known for the Birkin and Kelly bags, has an unparalleled cult status that translates into exceptional financial figures. In the first half of 2025, Hermès even succeeded in increasing its turnover by 8%-9% despite the weakness in the sector (source). The downside is that this high-quality stock is extremely expensive. The price/earnings ratio based on expected earnings for the next twelve months (the forward price-to-earnings ratio or Forward P/E) is 42.5 (situation as at 10 November 2025). This figure is based on analysts' expectations and is not a guaranteed indication of future performance.
• LVMH (Louis Vuitton Moët Hennessy) is the world's largest luxury goods group, boasting more than 70 brands ranging from fashion (Louis Vuitton, Fendi) and beverages (Moët & Chandon, Hennessy) to jewellery (Bulgari, Tiffany) and cosmetics (Sephora). This diversification gives LVMH some stability, as weaker performance in one area is often offset by stronger returns elsewhere. The downside is that LVMH has margins below those held by the pure luxury goods icons. Since the fall in price in 2024, many analysts believe the stock is undervalued. The Arnault family (major shareholder) bought more than $1 billion in shares in LVMH in 2025 during the dip, in what was seen as a sign of confidence (source). Its price/earnings ratio for the next twelve months (Forward P/E) is 27 (situation as at 10 November 2025).
• Kering, the French parent company of Gucci, Saint Laurent, Bottega Veneta and Balenciaga, has enjoyed a roller-coaster ride in recent years. In the last decade, Kering proved to be a supernova due to Gucci's huge success. Yet Gucci's star has diminished over the past few years, and Kering's profitability has fallen sharply as a result. This arguably makes Kering the most speculative major luxury stock. Its price/earnings ratio for the next twelve months (Forward P/E) is 34.8 (situation as at 10 November 2025).
• Richemont is a Swiss giant known for Cartier (jewellery), Vacheron Constantin, Jaeger-LeCoultre (watches) and fashion brands such as Chloé. Richemont is particularly strong in 'hard luxury' – jewellery and watches, categories that were significantly affected by weak demand from China in 2024. Nonetheless, Richemont achieved modest growth of approximately 6% during the split financial year, driven by strong performances in the US and Europe (source). Its price/earnings ratio for the next twelve months (Forward P/E) is 28.7 (situation as at 10 November 2025).

Other listed luxury goods companies include Brunello Cucinelli, Burberry, Moncler, Swatch, Prada, Hugo Boss, Estée Lauder, Ferrari and Porsche AG.

How to invest in the luxury goods sector

There are generally two routes for investing in luxury goods: individual shares in luxury goods companies, or through a basket of luxury goods companies, typically in the form of an ETF. Both approaches have their pros and cons.

• Individual shares. If you have confidence in a specific company, stock picking can prove worth it. However, investing successfully in individual luxury stocks requires an understanding of the market and the strength of the brand. The challenge therefore lies in picking out the winners. That's no easy task, as individual names are more susceptible to suffering a setback.
• ETFs. For anyone who wants to get involved in the luxury goods trend without putting all their eggs in one basket, there are specialised index trackers. Some ETFs feature a blend of fashion brands, luxury car manufacturers, watch and jewellery makers, cosmetics and premium services. Such ETFs offer immediate diversification across all the major players.

An alternative to sector-based ETFs is investing through broader consumer ETFs or funds. These may also include luxury brands, but they typically cover a variety of other consumer sectors, from fast food chains to e-commerce.

Before investing, be sure to read up on the main characteristics and risks of financial instruments.

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