With China in the Doldrums, U.S. Will Fuel Luxury Goods Sales in 2025
Samantha Conti
6 min read
LONDON — The U.S. is set to be the main growth driver of luxury goods sales in 2025 as Chinese customers continue to pull back on spending, according to a new report by Barclays.
The bank said Americans are already driving around 25 percent of all luxury goods revenues, and are expected to spend more this year after a “challenging” 2024.
“Since the U.S. elections, consumer confidence seems to have improved on the back of a better wealth effect,” said the report, which was cowritten by Carole Madjo and Wendy Liu.
They expect luxury spending by U.S. customers to rise by around 6 percent in 2025, and said the rebound at LVMH Moët Hennessy Louis Vuitton could signal better times ahead.
“For some names, like LVMH, the American cohort has been negative but [the French group] has been gradually improving quarter-over-quarter in Fashion & Leather Goods, and we thus expect a return to growth in 2025, which could be the case for the rest of the sector as well,” they wrote.
Barclays’ outlook for the U.S. chimes with other companies’ projections of robust growth in the U.S. this year. That growth is set to be fueled by President-elect Donald Trump’s plans to slash tax rates, and eliminate a number of federal regulations which he believes stand in the way of economic growth.
British fashion brands, which are suffering at home due to higher taxes and tighter regulations, are eyeing growth in the U.S., too, opening stand-alone stores and selling through retailers including Neiman Marcus, Nordstrom and Dillard’s.
Louis Vuitton 57th Street store in Manhattan.
The U.S. is one of the U.K.’s biggest export markets, and the opportunities for growth are enormous due in part to the weaker pound.
As reported in December, Me+Em, a favorite of women including the Princess of Wales, Olivia Colman and Margot Robbie, opened its fourth U.S. store, and first mall location, at NorthPark in Dallas.
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 said North America has become its fastest-growing — and largest — market, with customers including Kylie Jenner, Olivia Rodrigo, Rihanna and Paris Hilton helping to drive sales.
Since 2018, gross sales in North America have grown to $318 million from $3.1 million, according to the company, which has a total of nine stores in the region. They include new brick-and-mortar locations at Roosevelt Field Mall in Garden City, N.Y.; Fashion Valley in San Diego, Calif., and Antara in Mexico City, Mexico.
Inside Me+Em’s first flagship in London’s Marylebone neighborhood.
Unlike their American counterparts, Chinese consumers will continue to lay low this year, according to Barclays.
Madjo and Liu pointed out that despite the country’s stimulus package announcement in September and a short-lived stock market rally afterward, “consumer sentiment remained cautious, as we observed from our recent trip” to the country.
They said the decline in the price of residential property, job security and pay cuts as factors that will likely weigh on consumer confidence in 2025.
“We expect the Chinese cohort to be down 1 percent in 2025 as we expect trends to remain broadly similar to 2024. As a reminder, we estimate that around 60 percent of Chinese sales are generated in mainland China and 40 percent of sales are generated offshore,” the report added.
The report said “onshore spending” sales are expected to be down 5 percent as the macro environment “should continue to weigh on luxury spending.”
With regard to “offshore spending, we expect sales to be up 5 percent in 2025, reflecting tough comparatives in Asia. [Last year] was marked by significant spending in Japan, and a still-limited sign of a pick-up in travel in Europe.”
The Ami store in Suzhou, China.
In Europe, “we don’t expect much from domestic consumers and think that growth could be flattish to slightly positive in 2025 as consumer sentiment remains muted,” Barclays said. “Once again, the main growth driver could come from tourists, notably American (benefiting from a foreign exchange tailwind) or Middle Eastern.”
The report added that the return of Chinese tourists in Europe “remains a possible tailwind, but we are probably more cautious than before as their presence in Europe shows limited sign of improvement.”
According to Barclays, the Middle East performed strongly last year, especially for names including Richemont and Prada, “which are seeing double-digit growth with Middle Eastern consumers. We don’t expect significant changes in trends in the Middle East, and remind readers that factors such as geopolitical tensions and changes in the oil price remain factors affecting consumer sentiment.”
Barclays considers India to be “an emerging market, and we still think that the country will remain a very small player in the luxury space for some time. We don’t expect it to move the needle in the short term.”
In its report, the bank also outlined the risks ahead, noting that Chinese demand could get even weaker as the country continues to undergo structural changes. In the short term, it said China could still deteriorate as the macro environment remains uncertain.
Former U.S. President Barack Obama speaks with President-elect Donald Trump before the State Funeral Service for former U.S. President Jimmy Carter earlier this month.
According to Barclays, the U.S. market could also be weaker than expected if aspirational consumers fail to return, as they may still feel “priced-out, and inflation could remain a drag to sentiment.”
Madjo and Liu also pointed out that Trump’s potential tariffs or protectionist measures “could be a positive for America but a headwind for the rest of the world.”
Overall, the bank is taking “neutral” view on luxury goods in 2025 given the modest growth and all of the headwinds the sector continues to face.
“In the current setting, we think that polarization in the sector will continue, and expect limited changes in terms of brand preferences. Winning names, which notably include Hermès, Richemont, Prada and LVMH, have one or more of the following criteria: high exposure to high-end consumers, who are more resilient; high exposure to the U.S. cohort; strong pricing power, and solid brand momentum.”
The bank said that “recovery stories,” including Kering, Burberry, Swatch and Ferragamo, will continue to underperform in the coming 12 months, although Burberry and Ferragamo have seen “small positive signs” around some of their product lines, including scarves at the former, and leather goods and shoes at the latter.
