Has Europe captured the lost demand? Not enough to transform the region into a growth driver, analysts say. HSBC has revised its organic growth forecasts for the full year downward for Europe, from 4% to 2.5%.
Galeries Lafayette Haussmann, whose sales surpassed €2 billion last year, offers a useful benchmark. Its sales were flat in Q1, after 4% growth for the 2025 full year. The slowdown can be credited to a decline in Asian tourist spend in Q1, confirming a trend that emerged at the end of last year. During a press conference on April 8, Galeries Lafayette CEO Arthur Lemoine partly attributed it to the Middle East crisis, as some Asian travelers pass through the region en route to Europe, while higher jet fuel costs are pushing up long-haul airfares. However, the Boulevard Haussmann flagship store in Paris saw a 14% uptick in shoppers from the Middle East in March, coinciding with the Ramadan period. “We remain vigilant,” Lemoine said.
Beyond revenues, consumer sentiment hangs in the balance. “If the conflict lasts for months, what will really suffer is the so-called ‘feel-good factor’, or the idea that you don’t buy luxury goods just because you have money, but because you feel good about yourself,” Rambourg says. “If the conflict drags on for months, consumers will face inflationary pressures and an anxiety-driven environment, so that feel-good factor will be affected.” HSBC has lowered its growth estimates for the sector in 2026, from 7% to 5.9%.
The impact of rising resource costs might also play out, especially in gas. “Middle lower income [consumers] will suffer with gas expenditures going up, and this could slightly impact discretionary spending depending on duration and severity,” says TD Cowen analyst Oliver Chen. “Gas surcharges will not necessarily impact luxury so quickly, but there are a lot of risks to consider based on the performance of the S&P500, the related wealth effect, and volatile consumer confidence factors, which are generally important drivers of luxury spending in the US.”
US holds up and Asia begins to improve
Brunello Cucinelli, which kicked off the earnings season on April 9, reported sales up 14% in Q1, led by the US and Asia, following 12% growth in Q4.
A slow recovery is underway in China, analysts say. “2026 appears to have started sequentially better than Q4, with single-digit growth, albeit with pronounced divergence across categories, cities, and brands,” UBS luxury analyst Zuzanna Pusz wrote in a note.
Galeries Lafayette, which has three joint venture stores in China — Shanghai, Beijing, and Shenzhen — has seen no improvement and is therefore reviewing its operations in the country. “The global context leads us to observe structural changes in the market, and requires us to adjust our China model,” Lemoine said at the press conference. “Market activity has contracted, with a shift toward more local brands at the expense of international ones.”
Rambourg highlights South Korea’s positive momentum, partly fueled by Chinese tourists shifting from Japan amid tensions. Brands are ready to welcome them: both Dior and Louis Vuitton opened Seoul flagships in 2025.
The US market is expected to have held up in Q1, despite stock market volatility, with HSBC projecting around 10% organic growth in 2026. “The US has a major store openings theme,” Rambourg notes. Moncler is opening what will be its largest store in the world in the second half of the year, in the General Motors building at 767 Fifth Avenue. Louis Vuitton has ongoing, large-scale retail projects in Beverly Hills and New York. Hermès confirmed plans to open a bigger flagship on Rodeo Drive. In August, Dior opened a New York flagship, while a Rodeo Drive store in LA featuring a restaurant by three-Michelin-star chef Dominique Crenn opened last fall. “There aren’t many openings globally, but in the US there will be quite a few — and that will help,” Rambourg says.
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