European luxury returns from hype to heritage, with scarcity and craftsmanship as the core support

Overview

This report is based on an expert call between UBS and the founder of a global luxury resale and archival fashion platform, discussing the latest changes in European luxury goods and the secondary market. The expert believes that after years of mass-market expansion, post-pandemic speculative buying, and a shift toward entry-level consumers, the luxury industry is entering a correction phase. Demand is becoming more segmented: trend-sensitive consumers are slowing, while core high-end clients remain active and are placing greater emphasis on scarcity, craftsmanship, brand heritage, and customer relationships.

Core views

The core view is that the luxury growth logic is shifting from short-term hype to long-term brand quality. Brands need to reduce reliance on entry-level and speculative demand and refocus on core clients, product quality, and relationship management. The secondary market is no longer just a discount channel; it is an important part of the luxury ecosystem that can support circular consumption and reinforce the primary market. By category, handbags and ready-to-wear remain solid, while high jewelry and watches are benefiting from trading-up behavior among repeat buyers. On pricing, classic items are more resilient, and the premiums on trend items and limited editions have clearly normalized from their pandemic peaks.

Analysis framework

The report uses an expert interview approach to observe the primary luxury market through transactions, supply, customer mix, and brand demand changes on a secondary luxury platform. The analysis focuses on brand divergence, category upgrading, demand for classic items and archival pieces, changes in resale premiums, and the relative performance of brands such as Hermès, LVMH, Chanel, Gucci, and Prada/Miu Miu.

Methodology notes

• Expert interviewExpert Call Feedback

  Obtain frontline secondary-market feedback through an industry expert call

  The report primarily relies on observations from the founder of a luxury resale and archival fashion platform to assess demand structure, price resilience, supply changes, and relative brand trends.

• Valuation methodDCF, relative valuation, SOTP

  Company target price valuation methods

  The report discloses that luxury company target prices are based on DCF, relative valuation, and SOTP methods, but the main focus of this piece is expert feedback rather than company-by-company valuation models.

• Rating definitionForecast Stock Return and Market Return Assumption

  UBS 12-month stock rating framework

  UBS defines Forecast Stock Return as the expected share-price appreciation over the next 12 months plus dividend yield; Market Return Assumption is the local market interest rate for one year plus 5%.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Hermès

  Anchor of the resale market and representative of high-end scarcity

  Strengths

  The brand has structurally strong demand; classic lines such as Kelly and Birkin still show pricing resilience, and VIP clients continue to seek scarce, low-profile pieces.

  Weaknesses

  Post-pandemic speculative and status-driven buying has weakened, and limited-edition premiums have clearly normalized.

  Comparison

  Compared with most brands, Hermès remains the pricing anchor in the secondary market, but its growth momentum depends more on core clients than on speculative enthusiasm.

  Risks

  If high-end demand slows or scarcity management becomes imbalanced, secondary-market premiums may continue to compress.

• LVMH / Louis Vuitton / Dior

  Europe's luxury leader and core brand portfolio

  Strengths

  Louis Vuitton shows stable momentum, and classic vintage monogram pieces are performing well, helped by recent marketing campaigns.

  Weaknesses

  Second-hand Dior demand is more selective and concentrated in iconic eras such as Galliano.

  Comparison

  In secondary-market feedback, Louis Vuitton is more stable than Dior, while Dior relies more on the appeal of specific archival periods.

  Risks

  Divergence in heat and archival value across brands within the portfolio could affect overall growth quality.

• Chanel

  A relatively strong private brand mentioned by the expert

  Strengths

  After Matthieu Blazy's creative debut, leather goods regained attention, and the expert believes its performance is better than peers.

  Weaknesses

  No listed financial data or UBS rating was disclosed.

  Comparison

  In the expert feedback, Chanel is viewed as a relative outperformer.

  Risks

  If the creative cycle or new-product execution falls short, demand momentum could fluctuate.

• Kering / Gucci

  A luxury asset more exposed to the fashion cycle

  Strengths

  The Tom Ford-inspired Demna era has brought archival Gucci demand back into view.

  Weaknesses

  After excessive exposure in the past, Gucci is more volatile and more affected by the fashion cycle.

  Comparison

  Compared with Louis Vuitton, Chanel, and Prada/Miu Miu, Gucci's demand stability is weaker.

  Risks

  Brand reset execution, acceptance of the creative direction, and fashion-cycle volatility are the main risks.

• Prada / Miu Miu

  A European luxury brand combination with strong demand

  Strengths

  Prada and Miu Miu are very strong trend-wise, have broad customer relevance, and Prada's secondary-market prices are close to retail.

  Weaknesses

  The report discloses a Neutral rating for Prada, showing that the stock is not simply the same thing as brand heat.

  Comparison

  In the expert feedback, Prada/Miu Miu's demand strength is better than that of most trend-driven brands.

  Risks

  If momentum weakens or valuation already reflects strong demand, share-price upside may be limited.

• The Row / Phoebe Philo / archival Versace

  Beneficiaries of quiet luxury, craftsmanship, and archival demand

  Strengths

  They benefit from rising consumer interest in understated style, craftsmanship, and distinctive creative periods.

  Weaknesses

  Market size and liquidity may be lower than the core brands of major luxury groups.

  Comparison

  They represent a shift from visible logos and short-term hype toward understated quality and archival value.

  Risks

  Niche preference may have limited diffusion, and demand could be influenced by changing tastes among high-end consumers.

Key data

• Hermès second-hand bag premiumroughly 2-2.5x retail down to about 1-1.5x retailThe resale premium on some pre-loved Hermès bags has normalized from the post-pandemic peak.
• Hermès International SCA rating and priceNeutral; €1,582.5; 2026-05-13From the company disclosure table, Reuters code HRMS.PA.
• Kering rating and priceNeutral (CBE); €240.60; 2026-05-13From the company disclosure table, Reuters code PRTP.PA.
• LVMH Moet Hennessy Louis Vuitton SA rating and priceBuy; €452.30; 2026-05-13From the company disclosure table, Reuters code LVMH.PA.
• Prada SpA rating and priceNeutral; HK$35.92; 2026-05-13From the company disclosure table, Reuters code 1913.HK.
• UBS global coverage rating distributionBuy 54%, Neutral 40%, Sell 6%From the UBS Global Research global equity rating definition table.

Impact & implications

For investors, opportunities are tilting toward companies with deep brand equity, strong classic categories, stable core customer relationships, and the ability to maintain scarcity. The growth logic that relied on trends, limited editions, and speculative premiums during the pandemic is cooling, so valuation and earnings expectations need to place greater weight on true end-demand, customer quality, and product lifecycle. Secondary-market price changes can serve as a supplementary indicator of brand heat, supply-demand balance, and product quality in the primary market.

Risks

• External factors such as terrorism and pandemics can affect consumption.
• Sharp political changes could disrupt tourism, consumption, and cross-border demand.
• Price pressure may squeeze brand profitability or weaken consumer acceptance.
• Damage to brand equity would directly affect both primary and secondary market demand.
• Management execution and succession issues may affect long-term brand performance.
• Changes in equity-market perceptions of long-term growth could affect valuations.
• Exchange-rate fluctuations may affect revenue, profit, and investment returns.
• Further normalization of speculative premiums in the secondary market may weigh on market perceptions of certain brands' heat.

What to watch

• Whether core high-end clients continue to remain highly engaged.
• Whether brands can shift back from mass-market expansion to scarcity, quality, and customer relationships.
• Whether the resale price gap between classic items, limited editions, and trend items keeps widening.
• Whether Hermès secondary-market premiums stay around the 1-1.5x retail range or continue to normalize.
• Whether the trading-up trend in high jewelry and watches can continue.
• Whether Gucci's archival demand under the new Demna cycle can translate into more stable primary-market demand.
• Whether the strong momentum in Prada and Miu Miu can be sustained and support near-retail secondary prices.