Editor’s Note
This article highlights a pivotal challenge for the luxury sector. As discounts become more prevalent and consumers scrutinize value, brands must navigate the delicate balance between exclusivity and accessibility to protect their margins and brand equity.
Luxury goods companies are facing renewed pressure on profitability following a sharp increase in discounts during 2025, as consumers increasingly question the value of high-end products after years of aggressive price hikes.
Sector data shows that up to 40% of luxury goods were sold at discounted prices last year, weakening margins across the industry, according to an FT report.
According to consultancy Bain and the Italian luxury industry association Altagamma, around 35% to 40% of luxury products were sold at reduced prices in 2025, at least five percentage points more than a decade ago.
This growing reliance on discounts has pushed the sector’s margins to their lowest level in 15 years, excluding the Covid-19 period, amid a widespread slowdown in demand for designer products ranging from shoes to handbags.
Consumers are increasingly choosing outlet stores over full-price purchases in boutiques, signaling a shift in buying behavior.
While some discounting also occurs in the brands’ own stores, it remains less common for top-tier brands that have historically sought to strictly control pricing and brand positioning.
Luxury groups raised prices significantly during the post-pandemic sales boom, helping to boost short-term profitability.
According to Bain, prices for many luxury products are now 1.5 to 1.7 times higher than in 2019.
However, the industry’s portfolio of successful new products has shrunk, making it harder for brands to justify these high prices.
The growing reliance on discounts poses a challenge for an industry that has spent years trying to reduce its exposure to wholesale and discount sales channels to maintain control over how prices are set and products are presented.
Sector buyers are already adjusting their strategies in response.
Luxury houses have recently brought in a new generation of creative directors at brands like Gucci, Chanel, and Dior, a move some believe could bring new energy to collections.
The same buyer said the changes should bring “new energy” to high-end design houses but warned that new designers still face a challenge.
Heavy discounting and slowing demand have visibly impacted profitability. Bain estimates that margins for personal luxury goods have fallen to levels not seen since 2009.
Average operating margins peaked at 23% in 2012 and 21% in 2021 but are expected to fall to around 15-16% in 2025.
Rising costs and the ongoing need to invest in marketing have increased the pressure.
Several major luxury groups have responded by cutting costs and rethinking their global footprint.
Kering, owner of Gucci and Saint Laurent, has been one of the sector’s worst performers in recent years and is conducting a portfolio review under new CEO Luca de Meo.
The group is seeking to cut costs and shrink its store network.
Market leader LVMH has also taken steps to curb spending, including scaling back marketing blitzes, cutting travel budgets, and closing underperforming stores, particularly in China.
At the same time, it has continued investing in high-profile projects like a large cruise ship-shaped flagship store in Shanghai, which opened last year.
Chanel reduced marketing spending and slowed hiring in China during 2025, the FT reported.
There are tentative signs of stabilization in China after two difficult years.
Sales of jewelry and luxury experiences, including travel and dining, have remained relatively resilient.