LONDON — The United States is set to become the main growth driver for luxury goods sales in 2025 as Chinese customers continue to cut back on spending, according to a new report from Barclays.
The bank said Americans already account for about 25% of all luxury goods income and are expected to spend even more this year after a “challenging” 2024.
“Consumer confidence appears to have improved since the US election on the back of improved wealth effects,” said the report, co-authored by Carol Majo and Wendy Liu.
They expect luxury spending by U.S. customers to increase by about 6% in 2025, and said the recovery at LVMH Moët Hennessy Louis Vuitton could point to a boom ahead.
“For some companies, such as LVMH, American companies are in the negative, but[the French group]is gradually improving quarter by quarter in the fashion and leather goods sectors, so we expect to return to growth in 2025. We expect the rest of the field to do the same,” they wrote.
Barclays’ outlook for the US is in line with other companies’ forecasts for strong US growth this year. That growth will be further fueled by President-elect Donald Trump’s plan to lower taxes and eliminate many federal regulations that he believes hinder economic growth.
British fashion brands, struggling at home due to higher taxes and tighter regulations, are looking to grow in the U.S., either by opening standalone stores or selling through retailers such as Neiman Marcus, Nordstrom and Dillard’s. I am doing it.
Louis Vuitton 57th Street store in Manhattan.
George Chinsey/WWD
The US is one of the UK’s largest export markets, and given the weaker pound, there are huge opportunities for growth.
As reported in December, Me+Em, popular with women including the Princess of Wales, Olivia Colman, and Margot Robbie, has opened its fourth U.S. mall store, in Dallas’ North Park. .
The goal is to expand further in 2025, and the brand is already exploring new locations on the East and West Coasts and in Texas.
British accessories brand Kurt Geiger says North America is its fastest growing and largest market, with customers including Kylie Jenner, Olivia Rodrigo, Rihanna and Paris Hilton seeing increased sales. He said that he is contributing to.
The company says that since 2018, its total sales in North America have increased from $3.1 million to $318 million, and it has a total of nine stores in the region. That includes a new brick-and-mortar store at Roosevelt Field Mall in Garden City, New York. Fashion Valley, San Diego, California and Antara, Mexico City, Mexico.
Inside Me+Em’s first flagship store in London’s Marylebone district.
courtesy
Unlike U.S. consumers, Chinese consumers will continue to be depressed this year, according to Barclays.
Majo and Liu said that despite the country’s stimulus package being announced in September and the subsequent stock market rally being short-lived, “consumer sentiment remains strong, as observed from their recent visit to the country. He said he was being cautious.
They cited falling residential real estate prices, job security, and wage cuts as factors likely to weigh on consumer confidence in 2025.
“We expect the Chinese cohort to decline by 1% in 2025, as trends are expected to continue broadly similar to 2024.To be clear, approximately 60% of sales in China We estimate that 40% of sales are generated on the mainland, with 40% of sales occurring offshore,” the report added.
The report said “domestic spending” sales are expected to decline by 5% as the macro environment “continues to weigh on luxury spending.”
Regarding ‘offshore spending’, we expect sales to increase by 5% in 2025, reflecting the tough comparisons in Asia. (Last year) saw significant spending in Japan, but there were still limited signs of a recovery in travel in Europe. ”
Ami store in Suzhou, China.
Provided by Ami Paris
In Europe, Barclays said: “We are not expecting much from domestic consumers and we think growth could be flat to slightly positive in 2025 as consumer sentiment remains weak.” said. “Again, the main driver of growth is likely to come from tourists, especially Americans and Middle Easterners (who will benefit from currency tailwinds).”
The report said the return of Chinese tourists to Europe “could still provide a tailwind, but perhaps more so than before, with limited signs of improvement in Chinese tourist presence in Europe.” “I’m being cautious,” he added.
Barclays said the region was particularly strong last year, with companies such as Richemont and Prada “showing double-digit growth among Middle Eastern consumers.” We do not expect any major change in trends in the Middle East and would like to remind readers that factors such as geopolitical tensions and oil price fluctuations remain factors influencing consumer sentiment. . ”
Barclays considers India an “emerging market” and still believes the country will remain a very small player in the luxury goods industry for some time. I don’t think it will make a big difference in the short term. ”
The bank also outlined future risks in its report, noting that Chinese demand could weaken further as China’s structural changes continue. In the short term, China’s economy may still worsen as the macro environment remains uncertain, he said.
Former US President Barack Obama met with President-elect Donald Trump earlier this month before former US President Jimmy Carter’s state funeral.
AFP (via Getty Images)
Barclays said that if motivated consumers don’t return, the U.S. market could be weaker than expected, with “prices still feeling expensive and inflation likely to continue to weigh on sentiment.” ”.
Majo and Liu also noted that President Trump’s potential tariffs and protectionist measures “could be a positive for the United States, but could be a headwind for the rest of the world.” did.
Overall, the bank has a “neutral” view on luxury goods in 2025, given the modest growth and any headwinds the sector continues to face.
“In the current climate, we believe the polarization of the sector will continue and we expect limited changes in brand preferences, particularly for award-winning companies such as Hermès, Richemont, Prada and LVMH. has one or more of the following criteria: High exposure to high-end consumers High exposure to the US cohort Strong pricing power and solid brand momentum.
The bank said “signs of recovery”, including Kering, Burberry, Swatch and Ferragamo, will continue to underperform over the next 12 months, but Burberry and Ferragamo are showing “small bright spots” in some product lines, including scarves. ” is visible. The former are leather goods and shoes.
