Quarterly earnings, regional dynamics, governance moves and strategic responses across luxury, beauty and conglomerates

As the 2026–2027 earnings season progresses, the luxury, beauty, and footwear sectors continue to exhibit a pronounced bifurcation between premium leaders accelerating growth and a cohort of stressed players contending with operational challenges and uneven regional recoveries. This dynamic is further intensified by key governance milestones, evolving regional market conditions, shifting distribution strategies, and the growing imperative of ESG and technological innovation.

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Arnault Family's Majority Ownership in LVMH: A New Era of Governance and Strategic Agility

The Arnault family’s recent crossing of the 50% ownership threshold in LVMH represents a watershed moment for the luxury conglomerate and the sector at large. This majority stake:

• Empowers LVMH with sharper strategic autonomy, enabling faster decision-making processes essential for portfolio optimization and targeted M&A. The divestiture of Make Up For Ever underscores this sharpened focus on core luxury and digitally native high-growth brands.

• Strengthens governance clarity, allowing streamlined integration of ESG mandates and compliance with rising investor and regulatory expectations.

• Sets a governance benchmark influencing peers to reconsider ownership structures and operational frameworks for enhanced agility amid market complexities.

Investor confidence has notably strengthened, positioning LVMH to navigate volatility with renewed decisiveness and a long-term strategic vision.

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Sectoral Bifurcation Deepens: Premium Leaders Outpace While Stressed Brands Face Headwinds

The latest earnings reveal a stark divide between high-performing premium brands and those grappling with market pressures:

• Hermès sustained its premium momentum with a 9.8% sales increase in Q4 2025 and a 9% organic growth for the full year, nearing €16 billion in revenue (constant currency). CEO Axel Dumas highlighted “robust momentum in the US” and cautious optimism about China’s recovery, supported by disciplined supply management and premium pricing.

• L’Oréal’s luxury beauty division reported 6% organic sales growth in Q4 2025, buoyed by acquisitions like Gucci’s beauty license and strong travel retail and Greater China performance.

• Birkenstock leveraged wellness trends to deliver an 18% sales jump in fiscal Q1 2026, with the Americas driving a 14% increase, reinforcing its premium casual footwear positioning.

• Nike, Adidas, and Puma are now poised to lead sneaker market growth through a dual emphasis on innovation and sustainability, capitalizing on evolving fashion trends and increased health awareness. Their commitment to sustainable materials and circular economy initiatives is anticipated to reshape market leadership.

Conversely, several established players continue to face operational and regional challenges:

• Puma SE reported a Q4 loss of €335 million ($395 million) driven by a 21% sales decline and restructuring costs, leading to dividend cancellation—a stark signal of strategic recalibration.

• Crocs saw a 1.7% revenue decline in 2025, hindered by wholesale softness despite growth in DTC channels. CEO Andrew Rees remains committed to a DTC pivot to enhance margins and consumer loyalty.

• Estée Lauder struggles with travel retail softness and competition in Greater China, projecting a subdued near-term outlook.

• Kering enjoyed a resurgence led by Gucci’s revival and a 12% share price jump in Q4 2025, though margin pressures persist due to climate-related investments and regulatory costs.

• LVMH’s Sephora division experienced mixed regional outcomes, with losses in Australia offset by steady growth elsewhere, highlighting ongoing market fragmentation.

• E-commerce player Cettire improved profitability despite U.S. trade headwinds, illustrating the importance of operational efficiency in challenging environments.

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Regional Market Dynamics: Resilience in Western Europe and Americas, Uneven Recovery and Circular Economy Growth in China

Geographic disparities remain a defining feature of sector performance:

• Western Europe and EMEA markets demonstrate solid resilience, driven by premiumization, immersive retail experiences, and operational efficiencies. Noteworthy flagship openings—such as lululemon’s 100th store in Poland, AMIRI’s Bond Street flagship in London, and Muji’s upcoming Paris flagship—signal sustained confidence. Brands like Moncler, Puig, and LVMH’s Western European divisions continue to post robust results.

• Greater China’s recovery remains cautious and uneven, despite a positive lift during the extended nine-day Lunar New Year in early 2026. Luxury leaders like Hermès and L’Oréal express guarded optimism, balancing hopeful consumer trends against ongoing macroeconomic and regulatory uncertainties.

• The secondhand luxury market in China expanded by 15–20% in 2025, propelled by rising consumer demand for sustainability and circular economy products. This aligns with global regulatory support, including Europe’s anti-destruction laws, and reflects a broader shift toward circularity.

• Travel retail in China is gradually improving but remains below pre-pandemic levels. Success increasingly depends on localized digital engagement and authentic sustainability narratives to rebuild consumer trust.

• The Americas market remains stable, supported by loyal premium consumers and wellness trends that benefit brands like Hermès, Birkenstock, and sneaker leaders Nike and Adidas.

• In Russia, a recent trademark dispute ruling distinguishing ‘Clover’ and ‘Clever’ brands exemplifies ongoing intellectual property complexities in regional markets—a reminder that legal clarity remains critical in protecting brand equity.

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Distribution and Channel Transformations: DTC Growth, Wholesale Selectivity, and Secondhand Expansion

Distribution strategies continue to adapt to margin pressures and evolving consumer preferences:

• The direct-to-consumer (DTC) channel accelerates, with Crocs exemplifying this pivot to enhance margins and loyalty amid wholesale softness.

• Wholesale remains vital but increasingly selective, as brands like Hermès carefully manage partnerships to protect exclusivity and pricing integrity.

• The secondhand luxury market’s rapid growth in China and beyond reflects expanding consumer appetite for sustainability and circularity, supported by startups innovating in resale and recycling.

• The JD Sports acquisition of Foot Locker marks a major reshaping of athletic footwear retail, prompting brands to rethink retail partnerships and inventory strategies in a changing competitive landscape.

• Global retail losses surged to a staggering $796 billion in 2025 (Appriss Retail, 2026), driven by shrinkage, returns, and fraud. This intensifies margin pressures and accelerates investment in advanced loss prevention technologies.

• Legal challenges persist, such as the Quince v. Deckers Outdoor Corp. antitrust lawsuit over UGG intellectual property, underscoring the ongoing risks around brand protection and market competition.

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ESG and Technological Innovation: Cost Pressures, Circularity Advances, and AI-Driven Transformation

Sustainability and technology remain pivotal, albeit costly, differentiators:

• Premium brands advance sustainable materials such as Loro Piana’s Royal Lightness fabric and Spinnova’s blockchain-verified N5 fiber, driving circularity and supply chain transparency.

• Collaborative platforms like Circ®’s Fiber Club scale recycled fiber adoption, enhancing supply chain sustainability.

• AI-powered solutions revolutionize inventory management, supply chain visibility, and ESG reporting. Urban Outfitters’ agentic AI automation and Aptean’s N2 system demonstrate how technology boosts agility and mitigates greenwashing risks.

• Compliance with evolving regulatory frameworks—including the EU Corporate Sustainability Reporting Directive (CSRD) and the UK’s Sustainability Reporting Standard (SRS)—raises operational costs but also offers differentiation opportunities for early movers.

• Consumer-facing AI applications, such as personalized search and AI-driven marketing, become essential for DTC success.

• On-demand manufacturing models (e.g., Printful’s eco-conscious production) support waste reduction and operational efficiency.

• Upstream suppliers like Unifi, Inc., producer of REPREVE® recycled fibers, announced ambitious 2026 targets focused on expanding recycled content and shrinking carbon footprints.

• KPMG’s updated materiality guidance assists companies in prioritizing sustainability issues aligned with stakeholder expectations, improving reporting quality and credibility.

• The surge of circular economy startups adds fresh innovation momentum, offering scalable solutions that reinforce sustainability and circularity—critical themes for luxury and beauty sectors.

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Legal and Market Challenges: IP Disputes, Tariff Volatility, and Legacy Brand Pressures

The sector’s legal and operational landscape grows more complex:

• The Meta vs. EssilorLuxottica dispute over AI-enabled Ray-Ban product pricing highlights tensions at the intersection of technology and luxury, spotlighting challenges in intellectual property governance and AI commercialization.

• Supply chain risks and tariff uncertainties persist, exemplified by Steven Madden’s withdrawal of 2026 guidance following a U.S. Supreme Court tariff ruling, underscoring geopolitical and regulatory volatility.

• Legacy brands such as Lanvin continue downsizing through asset sales like Caruso menswear, reflecting persistent profitability pressures and uncertainty around the future of distressed heritage labels.

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Strategic Portfolio Moves and Brand Revitalizations: Sharpening Focus and Injecting Fresh Energy

Portfolio transformations remain central to sector strategies:

• LVMH’s divestiture of Make Up For Ever aligns with its sharpened focus on luxury brands with strong digital and experiential assets.

• The sale of John Elliott to Centric Brands and Sam Ben-Avraham illustrates ongoing recalibrations in premium fashion portfolios.

• Beauty consolidation persists, with Warpaint London’s acquisition of Barry M signaling continued sector consolidation.

• The Arnault family’s majority ownership unlocks greater strategic freedom, accelerating acquisitions and investments aligned with long-term priorities.

• Gucci’s revitalization under creative director Demna Gvasalia infuses fresh cultural vision and energy into Kering’s flagship brand, underscoring the importance of visionary leadership in brand turnarounds.

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Conclusion: Navigating Complexity Through Governance Clarity, Regional Agility, and Innovative Discipline

The 2026–2027 luxury, beauty, and footwear sectors are defined by:

• A clear divide between premium growth leaders and stressed players facing operational and regional headwinds.

• The Arnault family’s majority control over LVMH crystallizes a new era of governance clarity and strategic agility, enabling sharper portfolio focus and accelerated innovation.

• Regional dynamics remain complex, with resilience in Western Europe and the Americas balanced against an uneven but promising recovery and robust secondhand market growth in Greater China.

• Distribution is rapidly evolving toward DTC expansion, selective wholesale, and secondhand channels, amid heightened margin pressures and retail losses.

• ESG compliance costs and regulatory mandates challenge margins but drive purposeful innovation in sustainable materials and circularity.

• AI and technology emerge as critical enablers of efficiency, personalization, and authentic ESG reporting.

• Legal and geopolitical complexities, including IP disputes and tariff volatility, demand vigilance.

In this intricate global ecosystem, brands and conglomerates that master financial discipline, regional insight, governance clarity, and purposeful innovation will secure leadership and sustainable growth in the evolving luxury, beauty, and footwear landscape.