Jakarta. Global sales of personal luxury goods are slowing but not collapsing, according to a study released Thursday by consulting firm Bain & Co.

Sales in the sector fell to €364 billion ($419 billion) in 2024 and are projected to decline by another 2 percent to 5 percent this year. The report attributes the downturn to threats of US tariffs and escalating geopolitical tensions that are triggering broader economic slowdowns.

“Still, to be positive in a difficult moment with three wars, slowing economies, and inequality at a peak; it’s not a market in collapse,” said Claudia D'Arpizio, Bain partner and co-author of the report. “It is slowing down but not collapsing.”

In addition to external pressures, luxury brands have turned off consumers with a perceived creativity crisis and aggressive price hikes. The study also notes that investigations in Italy have revealed sweatshop-like conditions at subcontractors making luxury handbags, further damaging brand reputations.

The US and China, two of the industry's largest markets, are seeing sharp declines in luxury spending. In the US, volatility surrounding tariffs has shaken consumer confidence, while China has recorded six consecutive quarters of contraction due to weakened sentiment.

By contrast, markets in the Middle East, Latin America, and Southeast Asia are posting growth. Europe, meanwhile, remains mostly flat.

This uneven landscape is fueling a divide between high-performing and struggling brands. For example, Prada Group reported a 13 percent year-on-year increase in first-quarter revenue to €1.34 billion, while Gucci’s sales dropped 24 percent to €1.6 billion during the same period.

In response to Gucci’s underperformance, parent company Kering recently appointed Luca De Meo, former CEO of Renault, as group CEO to steer a turnaround. The move comes as Kering revamps the creative leadership at three of its brands: Gucci, Balenciaga, and Bottega Veneta.

Kering’s shares surged 12 percent following the announcement. D'Arpizio highlighted De Meo’s track record, including leading Renault back to profitability and his previous marketing leadership roles at Volkswagen and Fiat.

“All of these factors resonate well in a market like luxury, where growth is still essential but there’s also a need for agility in cost management and brand revival,” D’Arpizio said.

To mitigate the potential impact of US tariffs, some brands are adjusting their operations. For instance, shipping directly from production sites instead of warehouses and lowering in-store inventory levels. With design overhauls underway, “stuffing the channels doesn’t make a lot of sense,” D’Arpizio added.

Still, many of the challenges facing the sector lie beyond companies' control.

“Most of these negative factors aren’t going to change soon,” she said. “We might get more clarity on tariffs, but we’re unlikely to see an end to wars or political instability in the coming months.” She added that consumer confidence in the luxury segment tends to be more influenced by stock market performance than geopolitics.

Matteo Lunelli, president of Italian luxury brand association Altagamma, noted that the sector has grown 28 percent between 2019 and 2024, putting it well above pre-pandemic levels.

While luxury spending is sensitive to global turmoil, it historically rebounds quickly, often driven by emerging markets and pent-up demand. For instance, during the 2008–2009 financial crisis, sales of luxury apparel, handbags, and footwear dropped from €161 billion to €147 billion. But the market rebounded by 14 percent in 2010, fueled by surging demand in China. Similarly, after a 21 percent drop during the COVID-19 pandemic, post-lockdown spending pushed sales to new records.