Luxury brands hit by drop in tourist spending in Europe and Japan

In the second quarter of last year, sales in Japan jumped by 57 per cent at the group behind Louis Vuitton and Dior, and by 27 per cent at Gucci owner Kering.

At its earnings report last month Italian outerwear brand Moncler blamed a 2 per cent organic sales decline on weaker spending by Americans in Europe and by Chinese shoppers in Japan.

At Prada, where tourists contribute 30 per cent of sales globally, management also attributed a 2 per cent decline in first half sales at its namesake brand on the same factors.

The US dollar has fallen by more than 10 per cent against the euro in the first half of 2025 as concerns over inflation, related to US President Donald Trump’s tariffs, caused a sell-off of US assets.

That has diminished the incentive for US travellers to live out their ‘Emily in Paris’ fantasies with spending sprees in the continent’s luxury boutiques.

Analysts at Citi noted that even Switzerland-based Richemont, where jewellery sales at Cartier and Van Cleef & Arpels underpinned another quarter of double-digit revenue growth, will come under pressure from weaker tourist spending in Japan and Europe over the next year.

Tourist spending is slowing as prospects for local spending in luxury’s two most important markets remain uncertain. Chinese consumer confidence, shaken by a decline in local asset values in the wake of the pandemic, remains stuck at record lows.

And demand in the US, luxury’s biggest market by sales, appears fragile as Trump’s tariffs threaten to usher in another wave of price inflation on goods manufactured overseas.

Bernstein forecasts a 2 per cent decline in global luxury revenues in 2025, reversing its previous prediction of 5 per cent growth because of the increased likelihood of a global recession.

The decline in tourist shopping is linked to deeper questions facing the industry, which cashed in on years of buoyant demand by pushing through above inflation price increases, according to Bernstein analyst Luca Solca.

“Luxury consumers are still looking for value — Chinese tourists are not in Japan because they want to go see Mount Fuji,” said Solca. 

“This is an indirect indication that too many luxury brands pushed too many price increases, and that they need to do some homework in order to appeal to consumers — particularly middle classes — again.”

Adrienne Klasa © 2025 The Financial Times.

This article originally appeared in The Financial Times.