Luxury shopper recovery faces four key headwinds

Published On: July 27, 2025

Investors are on the hunt for signs of green shoots in the luxury market recovery.
Currency fluctuations, U.S. shopping spikes and price rises are among the key trends dominating the industry this quarter.
Upcoming earnings from Kering, Hermes and Prada will give a full picture on how high-end shoppers are holding up.

Regarding the long-awaited revival of the luxury industry, high-end consumers are giving a mixed picture, with lower sales continuing to have an impact on business projections.

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However, Friday saw luxury stocks rise as investors placed bets on the appearance of recovery signs after bellwether fashion major LVMH reported better-than-expected results.

Following Thursday’s market close, LVMH reported second-quarter sales of 19.5 billion euros, a 4% year-over-year reduction that was marginally less than the 3% decline predicted by the consensus.

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“This was not a stellar quarter for LVMH,” noted Adam Cochrane, a luxury equity research analyst at Deutsche Bank, in a report on Friday. “However, we see some glimmers of hope with a sequential improvement in cFX [constant currency] sales expected from 3Q onwards and most of the sales weakness related to weaker tourism.”

With new results from Kering, Hermes, and Prada expected next week, here are four major patterns to watch as earnings season progresses.

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Luxury companies are always concerned about foreign exchange swings, but this quarter is particularly so because of the high comparative sales from the previous year.

In 2024, a steep drop in the value of the Japanese yen led to a spike in both luxury purchasing and tourism. However, brands are currently struggling with balance.

After a 59% increase over the same period last year, Richemont saw sales in Japan decline 15% year over year in the three months leading up to June. Additionally, Burberry reported a “challenging performance” in Japan during the second quarter, while Chanel stated that Japan was the only Asia market to perform poorly, both without supplying exact numbers.

However, some businesses pointed out that a decline in travel to Japan and, to a lesser extent, Europe, has led to an increase in local spending in some other areas.

LVMH’s Chief Financial Officer C cile Cabanis stated on an earnings call Thursday that “[in China] we have seen tangible improvement locally,” referring to a “repatriation from the big drop we’ve seen in tourism to Japan.”

Even while consumers anxiously await the effects of tariffs, a number of luxury companies have also reported a strengthening in U.S. sales in the second quarter.

Over the second quarter, Burberry, Richemont, Moncler, and Bruno Cucinelli all reported higher sales in their U.S. markets, but LVMH observed that U.S. demand was “broadly unchanged.”

However, the manufacturers say it is unclear how much of the increase is due to U.S. consumers frontloading purchases before the full implementation of tariffs.

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“To inform you that the desire to purchase items related to the tariffs was the driving force behind this? On a Wednesday earnings call, Roberto Eggs, the chief business strategy and global market officer at Moncler, stated, “To be honest, I can’t tell you.”

In an effort to make up for the ongoing weak demand in the important Chinese market, luxury brands have also been focusing more on the U.S. market in recent quarters.

Joshua Schulman, CEO of Burberry, claimed that the company’s recent expansion in the United States demonstrated the “diversity of the luxury consumer that exists in that market,” which includes both high-traffic mall patrons and affluent, elite consumers.

The future for the majority of European luxury houses, who largely depend on local manufacture as part of their cache, is still being negatively impacted by U.S. tariffs.

Many have therefore indicated that in order to cover additional expenses, businesses will have to increase prices in the upcoming quarters.

In the United States, Brunello Cucinelli announced price increases of 3% to 4%, while Moncler announced “mid-single-digit” percentage increases for the upcoming year. Burberry, on the other hand, claimed that as part of larger reform initiatives, it started modifying prices last year.

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However, LVMH stated on Thursday that price increases would have to be accompanied with a “improvement in the product” or a slight adjustment to account for inflation.

The French luxury giant continued, however, by stating that price increases were one of the “several levers” available to it to mitigate the effects of tariffs.

It comes as luxury products have seen the slowest rate of price increases since 2019—an average of 3% so far this year, according to UBS’ evidence lab—as firms have tried to balance higher input costs with customer retention after a price spike during the COVID-19 pandemic.

Lastly, the category mix continues to be a key component of the divided luxury picture, with brand attraction being just as important as the actual product type.

Even though high-end watches, both its own and those of other luxury watchmakers, continue to be a weak point for Richemont, the owner of Cartier, jewelry is still a profitable strategy.

Even while leather purses for the ultra-luxe brand Hermes are becoming more and more popular, Tiffany’s parent company, LVMH, still struggles with softness in its jewelry, fashion, and leather goods maisons.

When Hermes reports on Wednesday, Carole Madjo, head of European luxury goods research at Barclays, told CNBC that she anticipates leather goods dominance to continue.

“[Hermes] is always very good, thanks to leather goods mostly,” she stated to “Squawk Box Europe” Tuesday afternoon.

On Tuesday, investors will be anxiously anticipating additional details from Kering, the company that owns Gucci, regarding its product redesign under new CEO Luca de Meo and artistic director Demna Gvasalia.

“Bringing newness, something fresh which has not been seen before, is I think what could make Gucci great again,” Madjo stated.