Luxury brands across Europe and Japan are experiencing a significant slowdown in sales, as a sharp decline in tourist spending adds pressure to a sector already grappling with the end of a prolonged boom and the economic uncertainty brought on by U.S. trade policies.
Leading luxury groups such as LVMH, Prada, and Moncler reported weaker-than-expected second-quarter results, with executives pointing to a notable drop in purchases by American tourists in Europe and Chinese travellers in Japan — two groups that have historically fueled luxury retail growth.
End of a Currency-Driven Boost
Last year, luxury sales were buoyed by favorable currency dynamics: a weak Japanese yen encouraged Chinese consumers to shop in Japan, while a strong U.S. dollar gave American tourists more purchasing power in European boutiques. However, those tailwinds have reversed in 2025. As the yen regains strength and the dollar weakens, international tourist shopping has slowed considerably.
According to Cécile Cabanis, Chief Financial Officer at LVMH, these shifts in spending behavior were the key reason for a 9% organic decline in the group’s flagship fashion and leather goods division during Q2. Cabanis noted a “very strong” decline in spending by American tourists and said that increased local consumption in Asia could not make up for the losses seen in Japan.
Sector-Wide Impact
The broader industry has felt similar effects. In the second quarter of 2024, sales in Japan had surged — up 57% at LVMH and 27% at Kering, the parent company of Gucci. But this momentum failed to carry into 2025.
- Moncler, the Italian outerwear brand, attributed a 2% organic sales decline to lower U.S. tourist activity in Europe and fewer Chinese shoppers in Japan.
- Prada also cited a 2% drop in first-half sales at its core brand, noting that tourists contribute roughly 30% of global sales for the group.
The situation is further complicated by the fall of the U.S. dollar, which has dropped more than 10% against the euro in the first half of the year. Analysts link the decline to fears of inflation driven by new tariffs introduced by U.S. President Donald Trump, which have spurred investors to sell off dollar-denominated assets.
As a result, the previously strong demand from American shoppers indulging in luxury experiences across Europe — a trend dubbed the “Emily in Paris effect” — has noticeably faded.
Uncertainty in Core Markets
Even Switzerland-based Richemont, which posted strong jewellery sales from brands like Cartier and Van Cleef & Arpels, may face challenges in the months ahead due to reduced tourist spending in key markets.
The overall slowdown in travel-related shopping comes at a time when domestic spending in China and the United States, the world’s two most important luxury markets, remains fragile. In China, consumer confidence continues to languish at historic lows, largely due to falling asset values and broader economic concerns in the post-pandemic period.
In the U.S., the outlook is similarly cautious, with the luxury sector potentially facing further price inflation if tariffs continue to rise on imported goods.
Industry Forecasts Adjusted
In response to these growing challenges, analysts at Bernstein have revised their outlook for the global luxury market. Instead of the previously forecast 5% revenue growth, the firm now expects a 2% contraction in 2025, citing the increasing likelihood of a global economic slowdown.
Bernstein analyst Luca Solca emphasized that the sector’s troubles are not solely macroeconomic, but also reflective of internal industry dynamics. “Luxury brands have pushed through too many price increases,” Solca said. “This is a wake-up call — particularly for those hoping to win back the middle-class consumer.”
According to Solca, the decline in tourist-driven shopping signals a need for recalibration. “Chinese tourists aren’t flying to Japan to see Mount Fuji,” he noted. “They’re seeking value. And right now, many luxury brands are failing to provide it.”
