Young shoppers, especially in China, drove better-than-expected Q3 sales—but sustaining the buzz won’t be easy.

A string of solid earnings from Kering, Prada, LVMH, and Hermès could be a sign of a broader sector turnaround. All four companies cited improving conditions in the US and China, the two largest markets for luxury goods. A recovery in China would be a particular relief, as brands have struggled to engage consumers worried about the country’s property crisis and other economic challenges.

LVMH is reportedly exploring a sale of its 50% stake in Fenty Beauty, according to Reuters. The move comes on the heels of Kering selling its beauty unit to L’Oréal for €4 billion ($4.3 billion)—suggesting that, after years of aggressive expansion, the two luxury conglomerates are taking a more targeted approach to growth. The market for beauty—particularly cosmetics—is showing signs of softening, which could explain LVMH’s desire to sell. But it’s more likely that LVMH is attempting to raise cash ahead of a potential bid for Armani

Kering is selling its beauty business to L’Oréal for €4 billion ($4.3 billion). The move will give Kering a much-needed cash infusion as it carries out a turnaround under new CEO Luca de Meo, while positioning L’Oreal to become a leader in luxury fragrance and beauty. The sale marks a bold first step by de Meo, who has the challenge of revitalizing Kering’s business amid considerable uncertainty in the luxury market. And it is a major strategic move for L’Oréal, positioning it as one of the world’s top producers of luxury fragrances at a time when the category is a driving force behind beauty growth.

The luxury sector is facing a “challenging” and “somewhat unprecedented” environment, Prada Group chairman Patrizio Bertelli said—causing even once-hot brands like the company’s namesake label to lose momentum. Luxury companies for the most part view the current downturn as a cyclical blip in an otherwise robust industry. But the prolonged slump is revealing structural challenges—namely, heavier reliance on American and Chinese consumers, as well as a tendency to lean on price hikes rather than innovation to drive sales.

Gucci sales slid 25% in Q1: The brand’s struggles put parent company Kering in a tough spot as it attempts to navigate a slowdown in luxury goods spending.

Luxury brands shake up their creative ranks: While Gucci is betting on provocateur Demna to revitalize its brand, Versace opts for a steadier path.

Prada nears €1.5 billion deal to acquire Versace: The move would give the luxury company broader appeal as spending cools.

Luxury brands are grappling with downturns in the US and China, the largest markets for personal luxury goods, and will have to seize opportunities for growth from new markets and product innovation.

Uniqlo, Ikea join luxury companies’ real estate spending spree: The two retailers snapped up prime space on Fifth Avenue to lock in their spots in a busy retail corridor.

Hermès’ strong Q3 performance makes it a luxury outlier: The company’s double-digit growth was in stark contrast to Kering’s slump, as weak global demand weighed on sales.

LVMH expands industry influence with Moncler investment: The deal would give the luxury conglomerate a board seat, as well as a piece of a brand that successfully weathered the downturn in China’s luxury market.

Mytheresa expands China presence in long-term bet on luxury growth: While the retailer is bullish on its ability to woo big spenders, the country’s economic crisis and booming daigou industry could weigh on its near-term prospects.

Chanel purchases Paris property at 42 Avenue Montaigne: The French designer snapped up the building one block from the Champs-Élysées as luxury competitors race to claim prime real estate.

Luxury brands are buying up premium real estate: Kering, LVMH, and Prada are spending big to acquire flagship properties on prime retail corridors.

As the dust settles on luxury’s big post-pandemic rebound, high-end brands will have to become savvier and more flexible to meet evolving consumer demands.

Luxury spending in the US is returning to historical norms: Shoppers are increasingly focused on saving money and travel.

US consumers' appetite for luxury is beginning to fade: But rapidly recovering demand from Chinese consumers will allow LVMH, Prada, Kering, and others to maintain their strong momentum.

Economic uncertainty caused investors to grow cautious: Even so, there were several significant acquisitions in 2022.

Which retailers and brands won (or lost) in 2022? Retailers that catered to the budget or luxury ends of the price spectrum did well, while those that dealt in discretionary categories like apparel and electronics saw the biggest drop-off in consumer spending.