The luxury fashion market delivered another mixed week, underscoring a widening performance gap between ultra-luxury houses and more accessible, mid-tier brands. While industry heavyweights like Hermès continue to shrug off macroeconomic headwinds, names such as Ralph Lauren, Capri, and Kering are facing mounting pressure from currency volatility, tariffs, and slowing demand in key Asian markets.
Earnings Season Highlights
Capri Holdings surprised markets with stronger-than-expected Q1 FY2026 earnings. Revenue of $797 million and EPS of $0.50 beat consensus forecasts, signalling early progress in its turnaround plan. The upbeat Q2 guidance lifted sentiment, but investors remain wary of longer-term brand revitalisation challenges, particularly at Michael Kors.
In contrast, Ralph Lauren posted one of the sharpest weekly declines among its peers, sliding roughly 8%. The company’s CFO struck a cautious tone for H2 2025, pointing to softening consumer sentiment and lingering tariff impacts. While North American direct-to-consumer channels remain resilient, international headwinds are weighing on growth expectations.
Ultra-Luxury: Holding the Line
Hermès once again proved the defensiveness of the ultra-luxury segment, reporting a 9% year-on-year revenue increase in Q2. Its tightly controlled supply, brand heritage, and high barriers to entry continue to insulate it from broader market softness. The resilience of its customer base—largely unaffected by interest rates or inflation—keeps Hermès among the sector’s most reliable performers.
LVMH and Kering were less immune. LVMH saw modest declines as a stronger euro and reduced Chinese tourist spending hit margins. Kering’s Gucci turnaround remains slower than analysts had hoped, raising concerns about the brand’s competitive momentum in Asia.
Mid-Tier Momentum Shifts
Tapestry ended the week slightly lower, reflecting sector-wide weakness despite having offloaded Stuart Weitzman to streamline its portfolio. Burberry emerged as one of the week’s outliers on the positive side, buoyed by early signs that its brand revitalisation strategy is starting to resonate with consumers, particularly in tourist-heavy retail hubs.
Hugo Boss managed to hold steady, with profits up 27% in Q2 despite a small sales dip, highlighting effective cost management and operational discipline.
Macro Pressures Still in Play
The broader luxury sector continues to wrestle with three interlinked macro factors:
Chinese demand slowdown — A critical growth engine for luxury, now dampened by slower domestic consumption and outbound tourism.
Currency headwinds — A strong euro squeezes export margins for European brands.
Tariffs and trade friction — Raising input costs and complicating supply chains, particularly for US-listed names.
Analyst Outlook
The divergence between ultra-luxury and mid-tier luxury brands is likely to persist through the second half of 2025. Investors will be looking for:
Sustained revenue growth at the very top end of the market (Hermès, select LVMH divisions).
Evidence of brand turnaround traction in mid-tier names (Burberry, Ralph Lauren, Michael Kors).
Operational efficiency gains to offset margin pressures from currency and tariffs.
While the sector overall is down ~12.5% year-to-date, the top-tier brands are proving that scarcity, heritage, and exclusivity remain the strongest forms of economic moat in luxury fashion.
