The Tamesis
Has Europe captured the loss in demand? Analysts say it’s not enough to turn the region into a growth driver. HSBC has lowered its full-year organic growth forecast for Europe from 4% to 2.5%.
Galeries Lafayette Haussmann’s sales of more than 2 billion euros last year provide a useful benchmark. Its first-quarter sales were flat after rising 4% for full-year 2025. The slowdown can be attributed to lower tourist spending from Asia in the first quarter, confirming a trend that emerged late last year. At a press conference on April 8, Galeries Lafayette CEO Arthur Lemoine attributed this in part to the crisis in the Middle East, as some Asian travelers pass through the region on their way to Europe and rising jet fuel costs have pushed up long-haul airfares. However, during the holy month of Ramadan in March, the number of Middle Eastern shoppers at the flagship store on Avenue Haussmann in Paris increased by 14%. “We remain vigilant,” Lemoine said.
In addition to income, consumer confidence is also crucial. “If a conflict lasts for months, what’s really affected is the so-called ‘feel good factor,’ or the idea that you buy luxury goods not because you have money but because you feel good about yourself,” Rambaugh said. “If the conflict continues for months, consumers will face inflationary pressures and an anxiety-driven environment, affecting the feel-good factor.” HSBC has cut its 2026 growth forecast for the industry to 5.9% from 7%.
The impact of rising resource costs is also likely to be felt, particularly in the natural gas sector. “Low and middle income [consumers] TD Cowen analyst Oliver Chen said: “Gasoline surcharges will not necessarily impact luxury goods that quickly, but there are a lot of risks to consider based on the performance of the S&P 500 Index, related wealth effects and unstable consumer confidence factors, which are often important drivers of luxury goods consumption in the United States.”
America holds on, Asia begins to improve
Brunello Cucinelli kicked off the earnings season on April 9, reporting a 14% increase in first-quarter sales following a 12% increase in the fourth quarter, with sales in the United States and Asia growing the fastest.
Analysts say China is slowly recovering. “2026 appears to be off to a better start than Q4, with single-digit growth, although there are clear differences across categories, cities and brands,” UBS luxury goods analyst Zuzanna Pusz wrote in a note.
Galeries Lafayette, which has three joint venture stores in China in Shanghai, Beijing and Shenzhen, is reviewing its operations in China as the situation has not improved. “The global situation leads us to observe structural changes in the market and requires us to adjust the China model,” Lemoine told a news conference. “Market activity has shrunk, with people turning to more local brands at the expense of international brands.”
Rambaugh highlighted the positive momentum in South Korea, driven in part by Chinese tourists diverted from Japan amid tensions. Brands are ready to welcome them: Dior and Louis Vuitton both opened flagship stores in Seoul in 2025.
Despite stock market volatility, U.S. markets are expected to remain stable in the first quarter, with HSBC forecasting organic growth of around 10% in 2026. “There’s a major store opening theme in the U.S.,” Rambourg noted. Moncler will open its largest store in the world later this year at the General Motors Building at 767 Fifth Avenue. Louis Vuitton is working on major retail projects in Beverly Hills and New York. Hermès has confirmed plans to open a larger flagship store on Rodeo Drive. In August, Dior opened a flagship store in New York, and last fall a restaurant by three-Michelin-starred chef Dominique Crenn opened at its Rodeo Drive store in Los Angeles. “There aren’t a lot of job openings globally, but there will be quite a few openings in the U.S. — and that will help,” Rambaugh said.
