High-end retailers experience reduced sales in significant European and Asian markets
The luxury goods market is currently facing a challenging period, with a revised forecast by Bernstein predicting a 2% decline instead of the expected 5% growth in 2025. This decline is attributed to a combination of factors, notably the weakening U.S. dollar against the euro and changes in tourist spending patterns.
In the first half of 2025, the dollar depreciated against the euro by over 10%, making luxury shopping in Europe more expensive for American tourists. This currency depreciation has reduced the purchasing incentives of American tourists, contributing to the expected decline in the luxury goods market.
The easing of global travel restrictions has also broadened destinations, dispersing tourist spending away from traditional luxury hubs like Paris and Milan. Economic uncertainties and geopolitical concerns, such as the conflict in the Middle East, have further dampened consumer confidence and travel intentions among U.S. tourists.
The impact on major luxury brands like LVMH, Moncler, Prada, and Swiss Richemont has been significant. LVMH’s fashion and leather goods division saw a 9% organic sales decline in Q2 2025 largely attributed to decreased American tourist spending in Europe. Prada and Moncler experienced similar hits in tourism-driven sales.
Despite increased local spending in Asia, it has not compensated for the drop in spending by U.S. tourists in Europe and Chinese tourists in Japan. The muted demand from both the U.S. and China is putting pressure on luxury sector revenues across Europe and Japan.
Luxury retailers and department stores in key tourist cities are facing lower-than-expected sales and are needing to recalibrate strategies, such as increasing focus on e-commerce and personalized customer experiences to retain high-value clients amid fragmented demand. Financial strains due to tariffs and export uncertainties affecting European luxury products, including French cosmetics and wines, are also impacting luxury conglomerates with diversified portfolios.
According to Luca Solca, a Bernstein analyst, luxury goods consumers are still looking for value. Brands in the luxury goods market will have to adjust their pricing policy to regain consumer interest. Chinese tourists were actively shopping in Japan due to the weak yen a year ago, indicating that the demand for luxury goods is not entirely lost.
In summary, the weaker dollar, changing global travel dynamics, and dampened consumer demand among American tourists are significantly reducing luxury goods sales in Europe, challenging revenue growth for leading brands including LVMH, Moncler, Prada, and Richemont. Brands will need to adapt their strategies to navigate these challenging times and maintain their market positions.
[1] Bernstein Research, 2025 [2] McKinsey & Company, 2025 [3] Financial Times, 2025 [4] The Economist, 2025
The depreciation of the U.S. dollar against the euro has directly affected the finance sector of the luxury business, reducing purchasing incentives for American tourists and impacting the revenue growth of major luxury brands like LVMH, Moncler, Prada, and Richemont. As a result, luxury retailers and department stores in key tourist cities are facing lower-than-expected sales and need to rethink their strategies, such as increasing focus on e-commerce and personalized customer experiences to retain high-value clients.
Financial strains due to tariffs and export uncertainties affecting European luxury products are also impacting luxury conglomerates with diversified portfolios. These challenges necessitate flexible and adaptive financial planning for these businesses to navigate these challenging times and maintain their market positions.
