Wars, Tariffs To Temper—but Not Crater—Luxury Sales/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Despite geopolitical turmoil and looming U.S. tariffs, global personal luxury sales are forecast to shrink only slightly—by 2–5% in 2025. Bain & Co. reports that while powerhouse markets like the U.S. and China face setbacks, other regions and top-performing brands are buoying the sector.
Global Luxury Outlook + Quick Looks:
- 2024 personal luxury sales reached €364 billion; 2025 projected to dip 2–5%.
- Bain & Co. warns of tariff fears, wars, economies slowing—but no crash.
- U.S. and China sales weakening; Middle East, Latin America, Southeast Asia growing.
- Creativity issues, steep price hikes, and sweatshop scandals dent brand loyalty.
- Prada revenue up 13% in Q1; Gucci down 24%, prompting executive shake-ups.
- Kering hires Luca De Meo to lead turnaround efforts.
- Brands adjust supply chains to sidestep tariff exposure.
- Luxury historically rebounds post-crisis—recovery seen after 2008 and 2020 downturns.
Wars, Tariffs To Temper—but Not Crater—Luxury Sales
Deep Look
Global personal luxury goods sales—which hit €364 billion in 2024—are forecast to decline by a modest 2–5% in 2025, according to a new study by Bain & Co. Conducted amid geopolitical uncertainty and stalled economies, the report highlights a market that is cooling but not collapsing.
“Still, to be positive in a difficult moment … it’s not a market in collapse,” said Bain partner Claudia D’Arpizio. The industry is being buffeted by three concurrent wars, slowing economic expansion, rising inequality, and growing consumer wariness linked to U.S. tariff threats.
Sales have softened in key markets like the U.S., where tariff volatility dents confidence, and China, which just logged six quarters of contracting demand. In contrast, markets in the Middle East, Latin America, and Southeast Asia are seeing growth, while Europe remains flat.
Beyond macroeconomic pressures, luxury brands face internal challenges. Creativity stagnation, steep price increases, and Italy-based revelations of labor abuses in subcontracted luxury leatherwork have alienated buyers.
Not all brands are affected equally. Luxury powerhouse Prada Group posted a 13% growth in Q1 revenue (€1.34 billion), while Gucci suffered a 24% drop to €1.6 billion in the same period. In response, Kering is shaking up leadership, appointing former Renault CEO Luca De Meo to restore brand momentum and costs discipline. The company also brought in new creative directors at Gucci, Balenciaga, and Bottega Veneta—moves that sent Kering’s stock soaring by 12%.
With possible U.S. tariffs on the horizon, brands are also restructuring supply chains—shipping directly from production sites, minimizing warehouse storage, and avoiding overstocking.
“Stuffing the channels doesn’t make a lot of sense,” added D’Arpizio, emphasizing the need for strategic inventory management.
External factors—e.g., tariff policy clarity—could shift but the geopolitical landscape is unlikely to stabilize soon. “Many of these aspects are not going to change soon… I don’t think we will stop the wars or the political instability in a few months,” she noted. Interestingly, luxury consumer confidence remains more correlated with stock market performance than geopolitical developments.
Despite near-term slowdowns, the luxury sector remains historically resilient. From €161 billion in 2007 to a rebound after the 2008–09 recession, and again following the pandemic-led slump in 2020, luxury sales have consistently not only recovered but reached new highs.
Matteo Lunelli, head of Italian luxury association Altagamma, highlighted this: “From 2019–2024 we’ve seen 28% total growth, well over pre‑pandemic levels.”
In summary, while tariff threats and conflict will dampen luxury sales in 2025, the solid recovery backdrop, diverse regional markets, and resilient brands suggest a temporary slowdown—not a market breakdown.
