European luxury goods Q1 outlook: industry remains differentiated, Richemont placed on Positive Catalyst Watch
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European luxury goods Q1 outlook: industry remains differentiated, Richemont placed on Positive Catalyst Watch
J.P. Morgan expects Q1 26 European luxury demand to broadly extend Q4 trends, but Middle East uncertainty, leather-goods new-product competition, and shifts in China travel spending will intensify brand differentiation.
- Average industry YoY growth is expected at about +3%, with average retail trading around +6%, though brand performance will differ materially.
- Jewellery and high-end ready-to-wear brands are expected to outperform; Brunello Cucinelli, Zegna, Richemont Jewellery Maisons, Moncler, and Prada are viewed relatively favorably.
- LVMH and Kering's Fashion & Leather businesses are still expected to face pressure, Gucci execution risk remains high, and Hermes growth is approaching the industry average.
- Richemont has fallen about -12% year to date, but Cartier momentum and jewellery business growth remain strong, so it has been placed on Positive Catalyst Watch ahead of FY26 results.
- U.S. Chase credit-card data continue to show improvement in discretionary spending, a bright spot in industry demand; Middle East and China-related travel spending remain near-term headwinds.
Report interpretation
Overview
This report is J.P. Morgan's event commentary ahead of the Q1 26 trading update for the European luxury sector. The core view is that sector trends broadly continue from Q4, but macro and geopolitical uncertainty is intensifying, especially the Middle East conflict, which is disrupting local consumption and travel flows and keeping brand performance differentiated. The report favors companies with strong brand momentum, advantages in jewellery or high-end ready-to-wear, and growth that does not depend on a single region, while remaining cautious on leather goods, turnaround stories, and larger mature brands.
Core views
The report believes Q1 26 will confirm the structural split within luxury. U.S. consumers remain strong, while European and Asian local clients are relatively stable, but the impact of conflict in the Middle East since late February is expected to extend into April. Brunello Cucinelli, Zegna, Richemont Jewellery Maisons, and Moncler are expected to perform well; among them, Richemont is included in Positive Catalyst Watch because of its share-price pullback and momentum in jewellery brands. By contrast, LVMH and Kering's Fashion & Leather are still expected to post negative growth; Hermes growth may converge toward the industry average, and turnaround or reset names such as Burberry, Hugo Boss, Pandora, and Swatch remain under pressure.
Analysis framework
The analysis combines expectations for a top-down industry trading update with bottom-up brand data. It uses J.P. Morgan's Brand Heatmap, Google Trends, brand website traffic, time spent on site, Sprinklr social-media mentions, Chase credit-card spending, price trackers, Japan tourism spending, Korean luxury sales, and Swiss watch export data to cross-check demand, brand heat, pricing actions, and regional spending shifts.
Methodology notes
Brand online heat tracking
Tracks brand momentum through indicators such as Google Trends, website visits, time spent on site, and social-media mentions to help assess the relative performance of each luxury brand in Q1 26.
Tracking U.S. consumer spending strength
Uses Chase credit-card data to observe spending trends across U.S. categories, age groups, and states; the report notes that U.S. discretionary spending continued to improve sequentially in Q1 26.
Global tracking of key luxury prices
Weekly tracking of prices for about 150 iconic products in France, China, the U.K., the U.S., Japan, the Middle East, and South Korea to assess pricing power, regional price gaps, and destination attractiveness.
Swiss watch export data
Uses Swiss watch export data broken down by country, price band, and metal composition to help model trends for Swatch and Richemont Specialist Watchmakers.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Richemont (CFR.S)Core positive catalyst name
- Strengths
- Jewellery Maisons are expected to deliver +11% double-digit growth in Q1, Cartier's online data are strong, and the post-YTD share-price decline makes the valuation entry point more attractive.
- Weaknesses
- H2 26 EBIT margin is expected to decline by 110bps year over year, weighed down by gold, FX, and gross-margin external pressure.
- Comparison
- Compared with soft-luxury leather-goods brands, Richemont benefits from jewellery and Cartier brand momentum.
- Risks
- Middle East exposure, precious-metal costs, FX, and weaker online trends for Van Cleef.
- Brunello Cucinelli (BCU.MI)Relatively attractive name
- Strengths
- Q1 retail sales are expected to rise +15%, Google Trends for the Brunello Cucinelli brand are up +86% YoY in Q1, and DTC growth could be among the best in luxury.
- Weaknesses
- The share price is down about -18% YTD, and the market remains sensitive to the sustainability of high growth.
- Comparison
- Stands out among high-end ready-to-wear and strong brand-momentum names.
- Risks
- Valuation, macro volatility, and the sustainability of growth after a high base.
- Zegna Group (ZGN)Relatively attractive name
- Strengths
- Q1 retail sales are expected to rise +11%; Google Trends for the Zegna brand are up +43% YoY, and Thom Browne online trends have also improved.
- Weaknesses
- Website traffic and time spent have slowed somewhat on a year-over-year basis versus Q4, partly due to a high base.
- Comparison
- Better than most soft-luxury brands in online heat and retail growth.
- Risks
- Volatility in high-end menswear demand and execution risk in the brand mix.
- LVMH (LVMH.PA)Cautious name
- Strengths
- Dior's online trends have improved after the change in creative director, and website time-spent is strong.
- Weaknesses
- Fashion & Leather is still expected to post negative growth, and the report believes some large luxury groups' historical growth drivers have been exhausted.
- Comparison
- Growth pressure is more evident than in jewellery and high-end ready-to-wear names.
- Risks
- The challenge of scaling further as size increases, leather-goods new-product competition, and regional demand volatility.
- Kering (PRTP.PA)Cautious name
- Strengths
- Gucci's Q1 Google Trends, website traffic, and time-spent metrics have turned positive, and some online indicators for YSL, Bottega Veneta, and Balenciaga have improved.
- Weaknesses
- The improvement mainly comes from a low base, the two-year stack remains weak, and Gucci execution risk is still high.
- Comparison
- Compared with Richemont and Brunello Cucinelli, Kering is still in the phase of reacceleration and building product novelty.
- Risks
- An uneven Gucci recovery path, market-share redistribution, and new-product execution risk.
- Hermes International (HRMS.PA)Name with growth slowdown risk
- Strengths
- Brand quality and pricing power remain strong.
- Weaknesses
- The report expects Hermes growth to move toward the industry average; lower price contribution, China macro volatility, and a slowdown in French tourism create pressure.
- Comparison
- Compared with its historical high growth, the current absolute scale makes further growth more challenging.
- Risks
- Middle East and travel-flow disruptions, competitive brands regaining momentum, and valuation sensitivity.
- Swatch Group (UHR.S)Cautious name
- Strengths
- Omega, Longines, and Tissot still show double-digit growth in Google Trends and website traffic.
- Weaknesses
- The China market remains fragile, and the watch category has relatively high wholesale exposure.
- Comparison
- It does not have as clear a category momentum as Richemont's jewellery business.
- Risks
- Greater China demand, wholesale-channel volatility, and weak Swiss watch exports.
Key data
- Expected Q1 26 industry average growthc.+3% yoyThe report estimates average industry YoY growth of about +3%, below Q4's +5%.
- Expected Q1 26 retail trading+6% average retail trading; +3% including wholesale salesQ1 retail trading is expected to be broadly similar to Q4, but growth is lower when wholesale is included.
- Expected Brunello Cucinelli retail sales+15% yoyQ1 retail sales are expected to be slightly above Q4's +14%.
- Expected Zegna retail sales+11% yoyQ1 retail sales are expected to be above Q4's +10%.
- Expected growth for Richemont Jewellery Maisons+11% yoyDespite relatively high Middle East exposure, jewellery is still expected to deliver double-digit growth.
- Richemont share performance-12% YTDThe report sees the pullback as creating a more attractive re-entry point and places the stock on Positive Catalyst Watch.
- Luxury sector share performance-10% YTD averageAlthough ceasefire news lifted the sector by about +6% in a single day, it is still down year to date on average.
- U.S. Chase total spending+5.0% in Q1 vs +4.2% in Q4January +4.4%, February +5.0%, March +5.6%, showing sequential acceleration within the quarter.
- U.S. discretionary spending+6.3% in Q1 vs +4.9% in Q4Discretionary spending improved versus Q4, a highlight noted in the report.
- Google Trends sector average+11% in Q1 vs +7% in Q4Online search interest improved sequentially.
- Brand website traffic+19% in Q1 vs +16% in Q4Website traffic continued to improve.
- Website time spent+23% in Q1 vs +13% in Q4Time spent improved more notably, which may point to better conversion potential.
Impact & implications
For investment implications, the report recommends choosing companies with category advantages and strong brand heat amid industry-wide uncertainty, rather than simply betting on a broad luxury recovery. Richemont's jewellery momentum, Cartier's online performance, and the share-price pullback create a short-term positive catalyst; Brunello Cucinelli, Zegna, Moncler, and Prada are also considered relatively supported. Large leather-goods brands, turnaround companies, and names with heavier wholesale exposure may face earnings revisions and execution risk.
Risks
- The Middle East conflict may continue to suppress regional consumption and affect travel flows.
- Demand in China and Greater China remains subject to macro volatility and uncertainty about recovery.
- A large number of new leather-goods launches may lead to market-share redistribution rather than overall demand expansion.
- The sheer size of large luxury groups makes further growth harder.
- Gold, FX, tariffs, and commodity costs may pressure margins.
- Wholesale channel destocking and shipment timing may weigh on companies such as Hugo Boss and Swatch.
- Turnaround brands such as Gucci, Burberry, Pandora, and Hugo Boss face elevated execution risk.
What to watch
- Whether Richemont's FY26 results on 2026-05-22 and Positive Catalyst Watch are validated.
- Whether Brunello Cucinelli's Q1 trading update continues to show DTC growth leading the industry.
- Whether U.S. Chase credit-card data continue to show accelerating discretionary spending.
- The impact of the Middle East conflict on luxury sales and travel flows in April and beyond.
- Whether Chanel momentum recovery creates share pressure on leather-goods brands such as Louis Vuitton, Hermes, and Gucci.
- Whether Gucci's new products and creative changes can convert low-base online improvement into a true sales recovery.
- Changes in travel-shopping flows to Japan and South Korea, and the migration of Chinese consumers' luxury spending across Asia.
- Swiss watch export data, especially whether Greater China improves from a fragile state.