PARIS — The luxury sector is settling into a more subdued period where mid single-growth will be the “new normal.”

This story first appeared in the November 19, 2014 issue of WWD. Subscribe Today.

That’s the conclusion of Bernstein Research, which forecast top-line growth of 5 percent in 2015 for personal luxury goods, and a similar pace through 2018.

Analysts Mario Ortelli, Piral Dadhania and Jordan Patel characterized 2014 as a “year of pressure” for the sector thanks to currency headwinds; weakness in China; softening tourist flows; poor consumer confidence in Europe, and political crises in Hong Kong, Russi and Thailand.

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“We expect a 2015 better than 2014, due to the easing of (foreign exchange), clean comps which include the full impact of anti-corruption measures and reversal of wholesaler destocking,” they noted in a report published Tuesday, also highlighting improving consumer confidence in the U.S.

Luxury growth, while inferior to the boom years of 2010 to 2012, is still poised to outpace global GDP, with jewelry, leather goods and accessories the standout categories. These high-margin products accounted for an estimated 51 percent of the market in 2013.

By region, emerging markets are expected to outpace developed ones, with the exception of the U.S., which should log 6 percent compound annual growth through 2018, at the same pace of China, making these “the two markets with the strongest growth opportunity,” the report said.

Megabrands such as Louis Vuitton, Gucci and Prada are expected to grow at a slower rate than the market, with “elitist” names such as Loro Piana, Bottega Veneta and Hermès benefiting from “increasing sophistication by the core luxury consumer” and upcoming brands such as Saint Laurent, Givenchy and Celiné continuing to show momentum, according to Bernstein.

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In a separate report, analyst Luca Solca at Exane BNP Paribas argued that the key challenge for luxury megabrands is to be considered desirable by aspirational consumers. In his view, Vuitton, Gucci and Prada are “not really trying to move upmarket” but rather “they are raising their entry price points to decrease ubiquity. Put simply, they are trying to avoid following Coach into trivialization.”

According to Solca, “there is not enough room at the high end to accommodate megabrands” and the success of entry-price point labels like Michael Kors suggests the bulk of the handbag market is below 1,000 euros, or $1,250 at current exchange.

Gucci is in a more fragile predicament than Vuitton on brand execution, especially in China, the report warns, lamenting that “Gucci’s creativity relies too much on reviving icons of the past;” that the Italian brand’s store network is inferior to Vuitton’s, and that it is more exposed to the grey market.

By contrast, Vuitton “benefits from high-profile investments aimed at anchoring the brand’s exclusivity in consumer’s minds.”

Meanwhile, Prada and Burberry have “fewer levers available to fight trivialization and sustain growth” and “the decision to price Miu Miu at the same level as Prada looks less than ideal from a strategic viewpoint and — at least so far — ineffective commercially,” the report said.

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