Luxury’s reset year: Kering steadies as China recalibrates

Kering’s revenue decline slowed to 3% in Q4 2025, the Paris-based luxury group reported Tuesday, marking its strongest quarterly performance of the year and signaling China’s luxury market is stabilizing after two years of steep contraction. The sequential improvement at the owner of Gucci, Saint Laurent and Balenciaga offers fresh evidence that mainland China’s luxury sector has entered what Bain & Company calls a “recalibration phase.” The consultancy forecasts 6% growth in the region in 2026 — but analysts warn only brands with pricing power will capture that expansion as aspirational demand remains weak. For the full year, Kering’s revenue fell 10% on a comparable basis to 14.7 billion euros ($17.5 billion), as reported and 13% on a reported basis. The fourth-quarter result represented a marked improvement from the third quarter’s 6% comparable decline, with trends improving sequentially across all regions except Japan. “Of course, 2025 was not the year we wanted. I think it didn’t reflect the full potential of Kering, and we all know it here,” Kering CEO Luca de Meo said on an earnings call Tuesday. “This revenue level reflects the low point of the cycle and the starting point of our rebound.” On the call, Kering CFO Armelle Poulou said fourth-quarter revenues fell 6% on a comparable basis in Asia-Pacific, which includes China, with sales down 16% in the region for the year. Mainland China was the region’s strongest performer in the three months ending December 31, 2025 Poulou said, with Chinese sales contracting by a mid-teens percentage — an improvement on the steeper declines earlier in the year. Stability returns, confidence does not Kering’s performance mirrors a broader market stabilization. According to Bain & Company, mainland China’s personal luxury market contracted 3%-5% in 2025, a significant moderation compared with the steep 17%-19% decline in 2024. “After the turbulence of 2024, the market in 2025 began to stabilize, although consumer confidence remained fragile,” Bruno Lannes, senior partner at Bain & Company, writes in the report. “What we are seeing is not a broad-based rebound, but the start of a recalibration phase, with early signs of recovery emerging in the second half of the year. This recalibration is also segment specific, with the Very Important Clients continuing to represent a large share of the market, while younger aspiring consumers have delayed entry into the luxury category.” The recalibration journey in China has been challenging across luxury peers, though performance has diverged sharply by brand positioning. At luxury menswear group Zegna, Greater China revenues fell 14.6% in 2025, the Milan-based firm said in a trading update earlier this month. The region’s performance improved in the fourth quarter, with revenues declining 10%, as the group faced a slowdown in sales at its Thom Browne brand and across its direct-to-consumer channel at Tom Ford Fashion, with overall wholesale performance impacted by delivery timing. The Zegna brand, whose business is 90% direct-to-consumer, saw some improvements in the region in the final quarter, though growth remained negative. The Italian company confirmed it would not renew the lease of 10 Zegna stores in China in 2026, embracing a quality-over-quantity retail strategy. “[Zegna’s] performance in Greater China in [2026] will reflect the pruning of the retail footprint for Zegna and Thom Browne,” says Luca Solca, analyst at Bernstein. “They aim to have fewer, but better stores.” Unlike Zegna, industry bellwether LVMH continues to bank its recovery on new stores in China. In its earnings update last month, the owner of Dior and Louis Vuitton said sales in Asia excluding Japan, a region driven largely by mainland China, rose 1% during the final quarter of 2025, down from a 2% gain in the prior third quarter. China’s sales performance in the second half of the year remained largely stable, with overseas spending improving over the last three months. “Louis Vuitton and Dior have upped the ante and one could hardly ask for more, in terms of creativity, retail execution, and events,” says Solca, in reference to the luxury behemoth’s opening a large ship-shaped Louis Vuitton store in Shanghai and a new Dior flagship store in Beijing in the second half. Burberry successfully recalibrated its pricing strategy in 2025 and reconnected with younger, aspirational shoppers in China. The British brand reported a 6% increase in Greater China sales in its third-quarter trading update last month, marking a standout rebound after walking back premature price hikes in 2024 and resetting brand codes that had failed to resonate with Gen-Z. Burberry CEO Joshua Schulman continues to reposition the brand as one of “timeless British luxury,” a strategy that blends core heritage categories, such as the iconic trench coat, with culturally attuned campaigns appealing to younger Chinese consumers seeking authenticity. “Burberry is seeing continued brand momentum in outerwear, strengthening traction with younger consumers in APAC, and improving retail productivity as a result of its revamped visual merchandising,” says Bernstein analyst Solca. The most high-end luxury brands, including Brunello Cucinelli, have been relatively insulated from the broader sector downturn, supported by sustained demand for “quiet luxury” and understated craftsmanship among Chinese consumers, especially high-net-worth individuals willing to pay for quality. In a trading update last month, Brunello Cucinelli posted an 11.5% annual sales increase, driven by U.S. and Asian appetite for its quiet luxury goods. In expressing gratitude for the company’s growth, Cucinelli acknowledged “its positioning in the highest luxury segment and the strength of an offering capable of generating desire, engagement, and an increasingly deep relationship with the final customer.” 2026: A test of pricing power Looking ahead, China’s luxury market is expected to grow 6% in 2026, with a 10% CAGR from 2027 to 2031, according to BNP Paribas, a figure that aligns with Bain and Company’s projection, which predicts “modest growth in 2026, albeit with continued volatility and uncertainty.”“A growing middle class, improving consumer confidence and favorable policies are expected to help direct more luxury consumption back to the mainland, while growth will remain highly category- and brand-dependent,” writes Bain and Company partner Bruno Lannes in the report. While luxury companies can look forward to increased demand in China and beyond, Jean-Philippe Bertschy, analyst at Vontobel, says brands with true pricing power, elevated craftsmanship, and disciplined storytelling will continue to outperform. “We expect 2026 to be a year of selective normalization rather than a broad-based rebound, with the top five to six groups widening their lead in value creation as ‘luxury fatigue’ and softer aspirational demand continue to bite,” says Bertschy. “After several years of aggressive price hikes across the sector, we think 2026 will serve as a real-world test of price elasticity. Brands combining pricing power, high-end craftsmanship and strong storytelling — from Hermès and Brunello Cucinelli in soft luxury to Rolex and Patek Philippe in hard luxury — remain best positioned to outgrow mass-luxury peers.”

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Luxury’s reset year: Kering steadies as China recalibrates