After the price-led decade: fashion and luxury rebuild on value

The personal luxury goods market contracted for the first time in years in 2025, falling to around €358 billion from €364 billion the year before, according to Bain & Company and Altagamma. Their mid-year update expects a modest recovery in 2026, with growth of 2% to 4% taking the market to between €365 and €373 billion. The authors are clear that this is stabilisation, not a return to the trajectory of the post-pandemic years.

The wider fashion industry is more cautious still. In the BoF and McKinsey State of Fashion 2026 survey, 46% of executives expected conditions to worsen this year, up from 39% a year earlier, and McKinsey forecasts another year of low single-digit growth. For leadership teams, the underlying message is that the levers that drove the last cycle no longer work on their own.

• €358bn personal luxury goods market in 2025, down from €364bn in 2024
• 76% of fashion executives name tariffs and trade disruption as the defining issue of 2026
• 50% of Gen Z consumers prefer to explore and shop new fashion brands (US consumers; BoF–McKinsey, State of Fashion 2025, p. 50).

Sources: Bain & Company / Altagamma (June 2026); BoF–McKinsey State of Fashion 2026 and 2025 (Gen Z: US sample).

What is happening in the industry

The pricing hangover

Between the pandemic and 2025, much of luxury’s growth came from price rather than volume. Analysts at HSBC described the resulting slowdown as partly self-inflicted, pointing to price increases that outpaced cost inflation without a matching step-up in creativity or quality. The group hit hardest was the aspirational customer, the occasional buyer who fuelled growth for two decades. Houses are now responding with more accessible entry products and a sharper focus on demonstrable craftsmanship, but trust is rebuilt more slowly than it is spent.

A creative reset that still has to land commercially

Kearney found that 2025 saw roughly three times as many creative director changes as in previous years, with many of the largest houses unveiling new directions on the Spring/Summer 2026 runways. McKinsey expects luxury to grow slightly ahead of fashion as these debuts reach stores. Yet early results are uneven, and analysts note that a new creative vision rarely shifts sales on its own. It needs merchandising, pricing, allocation and clienteling to follow through.

Individual style is harder to read

Younger consumers combine environmental awareness with an appetite for fashion and luxury, while mixing vintage, contemporary brands and contrasting aesthetics into personal looks. As NZZ Bellevue has observed, fashion is a means of exploring and expressing identity. For retailers, this makes buying a coherent assortment more demanding: the customer’s look may cross several brands, price points and categories. For brands offering a broader wardrobe, the challenge is to remain distinctive while creating pieces customers can combine in their own way. Understanding how people put products together becomes as important as knowing which products sell.

Brand preferences are also open to change. The State of Fashion 2025 reports that 50% of US Gen Z consumers prefer to explore and shop new brands, compared with 33% of consumers aged 50 and above. For retailers and brands, that openness creates an opportunity to earn a place in a changing wardrobe through relevant products and a clear point of view.

Where value is moving

Demand has not disappeared; it has changed shape. Bain and Altagamma expect luxury experiences such as hospitality and fine dining to grow around 4% in 2026, faster than goods. Regionally, the United States is the healthiest market, China is recovering cautiously, and Europe and the Middle East are under more pressure. McKinsey highlights the mid-market overtaking luxury as fashion’s main value creator, jewellery outperforming other categories, and resale moving into the mainstream, with 59% of consumers likely to buy secondhand this year.

Margin under pressure from trade

The new US tariff regime has become one of the most significant forces reshaping fashion supply chains. Three quarters of executives surveyed by BoF and McKinsey see trade disruption as the defining issue of 2026, and 71% plan further price increases, up from 52% a year earlier, even as 78% cite weak consumer spending as their main threat to growth. Margin, cost and cash management ranks as the second most important theme for the year.

Regulation is becoming operational

Since 19 July 2026, large companies placing apparel, accessories and footwear on the EU market have been prohibited from destroying unsold stock and must disclose what they discard; medium-sized firms follow in 2030. The Commission launched its Digital Product Passport registry the following day, with textile requirements expected from 2027 to 2028, alongside national extended producer responsibility schemes. Overproduction is no longer only a margin problem. It is now a compliance and reputational one.

The questions on the boardroom table

For CEOs, owners and investors in fashion and luxury, the agenda has narrowed to a handful of hard questions:

• Is our pricing architecture still credible to the customers we need to win back?
• How do we turn a new creative direction into sell-through, not just visibility?
• Is our commercial set-up ready for expansion? Which channels and markets should we tackle next and how?
• Can our planning and allocation cope with a market where unsold stock is destroying margin and can no longer be destroyed?
• Is resale, rental or repair a threat to our model, or a channel we should own?

These questions cut across creative, commercial and operational teams. They are rarely solved within a single function, and they often arrive at the same time.

Where an experienced Principal adds value

TPG Principals in this practice have run brands, retail networks, sourcing organisations and digital businesses at houses and groups across Europe, the United States and Asia. They bring hands-on experience of the decisions above, without the overhead of a large advisory engagement. Typical engagements include:

Pricing and assortment architecture

Rebuilding price ladders, entry categories and product hierarchies so that value is visible to the customer at every level.

Planning, allocation and inventory discipline

Tightening demand planning and open-to-buy so that production matches sell-through, and preparing for the ESPR destruction ban and disclosure rules.

Sourcing and supply chain resilience

Reviewing manufacturing footprints, supplier terms and landed-cost models in response to tariffs, and building traceability for Digital Product Passports.

Clienteling and market entry

Strengthening CRM and client development, and leading entry or expansion in growth markets or new channels.

Circular models and interim leadership

Designing resale, repair and rental propositions, and providing senior interim capacity through a creative transition or turnaround.

The houses that come through this cycle strongest will be those that align creative ambition with commercial and operational discipline. That alignment depends on experienced people who have made these trade-offs before.

If these questions are on your agenda, our Fashion & Luxury Principals are available for an initial conversation.

Sources

• Bain & Company / Altagamma mid-year update 2026 (via Quotidiano)
• Bain expects the global luxury market to grow 2% in 2026
• BoF and McKinsey, The State of Fashion 2026 (CFDA summary)
• State of Fashion 2026: pricing and consumer findings
• State of Fashion 2026: resale and growth outlook
• State of Fashion 2026: tariffs and margin themes
• CXG: Luxury seeks a return to growth (HSBC, Kearney)
• CMS: EU rules on destruction of unsold textiles
• EU destruction ban takes effect; DPP registry launch
• Silvia Ihring, NZZ Bellevue, “Die Gen Z stellt die Mode auf den Kopf”, 28 February 2023
• BoF–McKinsey, The State of Fashion 2025, p. 50: Gen Z brand exploration (US consumers)