The tariffs themselves, as they stand today, are still more manageable for luxury companies than many others, and stronger brands have more leeway to mitigate the impact through price increases. But in an industry reliant on consumer confidence, the deeper damage is psychological.
The brutal sell-off in global stock markets this year will leave many luxury shoppers nursing their wounds. “If you watch what happens with the stock market, you can [basically] predict the level of business in our boutiques,” Bruno Pavlovsky, president of fashion at Chanel, told the Financial Times last month.
Erwan Rambourg, managing director at HSBC, wrote that the risks to luxury lie in a combination of wealth destruction, constrained consumer spending power in the US and broad deterioration in consumer sentiment.
“We are expecting, quite literally, fewer champagne bottles to be popped this year,” he wrote.
HSBC now expects organic sales to be flat in 2025, in contrast to its previous expectation that sales would grow 5 per cent compared with 2024.
The bank’s analysts had upgraded most luxury stocks towards the end of last year in the belief they would benefit from a US-driven upturn in luxury spending. “That won’t be the case in our view any more,” they wrote.
Expectations for “slight growth” in mainland China, after a painful 2024, are also looking increasingly unlikely.
However, Hermes, the group behind highly sought after Birkin bags, is expected to continue outperforming. Analysts at Barclays estimate its sales will grow by 8 per cent in the first quarter.
But problems at Gucci, Kering’s biggest brand, have left the group heavily exposed to any downturn. Barclays expects Gucci sales to be down 25 per cent in the first quarter while Bernstein warns that Kering is now “highly unlikely” to meet its guidance for flat revenues and operating profit in 2025.
Adrienne Klasa © 2025 The Financial Times. Additional reporting by Lauren Indvik in London and Alex Rogers in Washington
This article originally appeared in The Financial Times.
