Fashion
European luxury groups hedge bets on predicting China comeback
By
Reuters
Published
October 22, 2025
Europe’s luxury companies, from LVMH to Hermes and L’Oreal, are tentatively pointing to signs of a revival in China, but are also cautious about calling the turn on one of their biggest markets after a two-year slump.
The $400 billion luxury sector has been hit hard by the downturn in China, which accounts for around a third of global luxury sales as Chinese shoppers snapped up Louis Vuitton and Birkin bags in Shanghai malls as well as in New York and London.
Now there are glimmers of hope that the worst may be over even though China’s troubles continue, with economic growth that is likely to have slowed to a one-year low in the third quarter as a prolonged property downturn and trade tensions hit demand.
LVMH’s more upbeat sales report last week spurred an $80 billion rally in luxury shares on optimism about a China revival, but luxury companies reporting this week have painted a mixed picture.
“I’m always very careful about China because one quarter doesn’t make a trend. But overall the market has gone into positive territory,” L’Oreal chief executive Nicolas Hieronimus said after the company reported its first China growth in two years, though missed sales forecasts, sending its shares down around 6% on Wednesday.
Hieronimus said the key driver had been the beauty group’s luxury division, which includes high-end brands like Lancome and Helena Rubinstein skincare. He said investors should not get over-excited given China’s tough economic conditions. The big focus was the mega Singles Day shopping festival on November 11. “Many times at the end of the year it’s between China’s 11/11 and the holiday season in America and Europe. So fingers crossed,” he said.
French luxury goods group Hermes on Wednesday flagged a “very slight improvement” in China, but its third-quarter sales came in below expectations, hitting its shares which fell more than 4%.
Eric du Halgouet, executive vice-president Finance, told analysts that the important October Golden Week holiday in Mainland China had seen “more dynamic activity”.
“We can’t extrapolate to the entire quarter, but it’s an encouraging sign,” he said, adding there had been a marginal improvement in foot traffic helped by a focus on higher-value products from more expensive watches to jewellery. “That said, we must remain cautious,” he added. “There are some positive signs, such as the evolution of stock markets and the stabilisation of the real estate market in certain major cities. These are elements that are encouraging us.”
The focus on high-end luxury could curb the benefits for more mainstream luxury and consumer product companies, which are under pressure in China as consumers shift to local brands and tighten their belts given general economic uncertainty. Deutsche Bank said in a research note that companies like L’Oreal had limited upside in China with credit growth waning, and growth skewed towards certain provinces.
LVMH has been the most bullish so far on China. The luxury group’s shares had their best day in over two decades last week after signs of improved demand in mainland China where sales turned positive for the first time this year.
Hermes, Gucci-owner Kering, Richemont, Burberry and Moncler all gained on hopes the industry’s two-year downturn was bottoming out.
Cecile Cabanis, LVMH chief financial officer, said last week China was stabilising, with mid-to-high single-digit local growth. Chinese tourist spending was still sliding but less than before. There were signs of restocking of cognac brand VSOP.
She said Vuitton had seen a “very steep improvement” in China sales, while Dior and Sephora had seen a better performance.
“It’s very encouraging,” she said, though highlighted that the economic picture in China had not changed fundamentally.
“We still have the real estate market, which is complex. We still have a high unemployment,” Cabanis said. “So we consider it’s still going to take time until we have a rebound on China as a whole.”
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For India’s textile and apparel (T&A) industry, which is deeply dependent on US buyers and already grappling with sharply higher duties imposed since August ****, the implications are severe. The US accounts for nearly $* billion of India’s T&A exports ($*.** billion during January–October ****, down from $*.** billion in ****), with apparel alone contributing $*.** billion. If a tariff were imposed anywhere near the headline rate, Indian garments would likely become commercially unviable almost overnight. US brands and retailers would be forced to reroute sourcing rapidly, while Indian exporters, who are highly exposed to the US market, would scramble to find alternative destinations for a large share of their exports. The US accounts for nearly $* billion of India’s T&A exports ($*.** billion during January–October ****, down from $*.** billion in ****), with apparel alone contributing $*.** billion, as per Fibre*Fashion**;s sourcing intelligence tool TexPro.
What exactly is the “*** per cent tariff” threat?
All geographic regions recorded growth at constant exchange rates, with particularly strong double-digit performances in the Americas, Japan, and the Middle East and Africa. Sales in the Americas climbed 14 per cent at constant rates, supported by robust local demand across all business areas and major markets. Europe recorded 8 per cent growth, underpinned by local demand and supportive tourist spending, especially from North American and Middle Eastern visitors, with the UK and Italy delivering notable performances.
Richemont SA has posted a strong Q3 FY26, with sales reaching €6.4 billion (~$7.424 billion), up 11 per cent at constant exchange rates, led by retail strength and broad regional growth.
The Americas, Japan, and Middle East & Africa delivered double-digit gains.
Nine-month sales rose 10 per cent at constant rates, while disciplined investment supported growth amid currency and cost pressures.
The Middle East and Africa emerged as the fastest-growing region, with sales up 20 per cent, led by strong momentum in the United Arab Emirates and double-digit growth across all business areas. Asia Pacific sales increased 6 per cent at constant rates. Sales in China, Hong Kong and Macau combined rose 2 per cent, largely driven by solid activity in Hong Kong, while South Korea and Australia posted robust growth. Japan delivered a standout performance, with sales rising 17 per cent, Richemont said in a press release.
By distribution channel, retail continued to lead growth, with sales up 12 per cent at constant exchange rates and accounting for 72 per cent of group sales. Online retail sales rose 5 per cent at constant rates.
The ‘Other’ business area of the group remained broadly stable. Within this segment, Fashion and Accessories Maisons posted a 3 per cent increase in sales.
During the quarter, the group benefited from new product launches and impactful communication, with Peter Millar and Gianvito Rossi posting solid momentum within the Fashion and Accessories segment.
For the nine-month (9M) period of FY26, Richemont reported sales of €17 billion, representing growth of 10 per cent at constant exchange rates and 5 per cent at actual rates. Growth over the period was broad-based across regions, channels and business areas.
The group continued to invest consistently in nurturing the long-term growth prospects of its Maisons amid a complex macroeconomic environment characterised by weaker major trading currencies and rising material costs, which continued to weigh on margins. Richemont ended the period with a robust net cash position of €7.6 billion, compared with €7.9 billion a year earlier.
Fibre2Fashion News Desk (SG)
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