Luxury Sector Revival Amidst Tariff and China Woes

Europe’s luxury sector is showing preliminary signs of revival following a positive earnings season, with several key brands reporting strong quarterly results, including Hermes, which posted impressive fourth-quarter sales. Major players like Kering and LVMH exceeded expectations, and Cartier-owner Richemont reached its “highest ever” quarterly sales in December. Analysts predict that 2024 may be one of the worst years for the sector, but they expect normalization and recovery in the latter half of 2025, primarily driven by U.S. and European consumers. However, concerns linger regarding declining sales in China, as highlighted by reports from L’Oreal and Kering’s Gucci, and the potential impact of U.S. tariffs that could impose a 25% levy on European luxury goods. Such tariffs may lead brands to raise prices, a challenge given the substantial previous increases. The current consumer trend indicates a marked selectivity, with a preference for high-quality brands, resulting in a divergence between top-performing luxury brands and those less favored. Anticipated economic impacts from tariffs, especially on Chinese consumer sentiment, could further complicate the sector’s recovery efforts.

Source: CNBC