Is the Luxury Market Downturn an Opportunity for Private Equity?

The luxury sector has been shaken in 2025, with LVMH and other industry leaders seeing sharp declines in value.

The roots of this downturn are clear: softening demand in both China and the U.S.-the world’s two largest luxury markets-has been driven by economic uncertainty, fluctuating consumer confidence, and changing spending habits among affluent buyers.

In China, a slower-than-expected recovery and ongoing trade tensions have dampened enthusiasm for high-end goods. Meanwhile, in the U.S., luxury spending is being squeezed by macroeconomic headwinds and shifting priorities among younger consumers.

Yet, for private equity firms, these challenges may spell opportunity. Here’s why:

• Depressed Valuations: Luxury stocks have fallen to multi-year lows, presenting attractive entry points for investors with a long-term view.
• Strong Fundamentals: Despite cyclical headwinds, luxury brands retain global appeal, pricing power, and high margins-qualities that favor a rebound as conditions normalize.
• Consolidation & Restructuring Potential: The current environment could accelerate M&A and consolidation, allowing PE to acquire undervalued brands or divisions and drive operational improvements.
• Digital & Strategic Transformation: With digitalization and direct-to-consumer models reshaping the sector, PE can unlock value by accelerating innovation and optimizing portfolios.

Importantly, not all luxury segments are equally affected. While fashion and accessories have felt the brunt of the slowdown, categories like luxury jewelry and watches, eyewear, perfumes, and cosmetics remain relatively bullish. Jewelry and watches, in particular, are forecast to grow steadily in the U.S. and globally, buoyed by e-commerce expansion, digital transformation, and enduring consumer desire for investment pieces. Luxury eyewear and perfumes also continue to see robust demand, driven by premiumization and aspirational branding.

For PE investors, the luxury downturn is less a warning sign and more a window of opportunity-provided they have the vision and expertise to navigate a rapidly evolving landscape.