Luxury Goods Market Faces Potential Downturn Amid Trade Tensions and Tariff Fears; Analyst Predicts Sales Decline

The luxury goods market, estimated at $400 billion annually, is facing a potential downturn due to concerns about a global recession fueled by trade tensions and tariffs. A Wall Street analyst, Luca Solca from Bernstein, anticipates a 2% decrease in worldwide luxury goods sales for 2025, a significant revision from the previously projected 5% growth. This decline, if it materializes, would represent the industry's most prolonged downturn in over two decades. Solca attributes this downgrade to the repercussions of tariffs imposed by the U.S. on its major trading partners. The newly imposed tariffs, ranging from 10 to 50 percent, are expected to increase costs for luxury brands. Specific regions such as Switzerland, which faces a 31 percent U.S. import tariff, are battling higher taxes than others. European luxury stocks have reacted negatively to the tariff announcements, mirroring growing investor concern over the potential impact on earnings within the sector. Shares of LVMH, a sector leader, have experienced a decrease since the beginning of the year. Similarly, Kering, the owner of Gucci, has seen a decline. Richemont, the company behind Hermes and Cartier, has also experienced a decrease. All eyes are on LVMH, which released its first-quarter financial reports on April 16, 2024, reporting 3% organic revenue growth.