“Boy it’s rough… but it won’t get rougher.” The headline of the note HSBC sent out following LVMH’s second-quarter earnings on 25 July is fitting for the broader luxury industry.
HSBC anticipated an overall 2 per cent drop for luxury in the second quarter, after the industry was flat in Q1. It turned out the sector’s performance in Q2 was “ slightly worse than expected”, says Erwan Rambourg, HSBC’s global head of consumer and retail research. The reason? Japan’s performance fell below expectations, while low tourism in Europe and a lack of aspirational consumer spending weighed on results, he says.
After more than a year-long industry slowdown, quarterly declines at luxury s biggest houses have become the norm — but 2025 was meant to offer a recovery period. Tariffs, geopolitical insecurity and a creative transition have kept performance for most luxury players muted. Is there any end in sight? “Things won’t rebound massively from here, but they certainly will get less bad,” says Rambourg. Third-quarter comparisons are mostly more forgiving, though Q4 comparables in the US will be difficult thanks to the post-election surge, LVMH CFO Cécile Cabanis noted during the LVMH earnings call.
Here are the five key learnings from luxury’s latest quarter.
1. Performance disparity
What’s striking is the polarisation of results, “even among the high-quality companies — think of the gap between the jewellery maisons at Richemont [up 11 per cent] and fashion and leather goods at LVMH [down 9 per cent],” Bernstein luxury goods analyst Luca Solca says.
Growth at the Swiss luxury group’s jewellery division continues to offset a weaker performance from watches and fashion. Meanwhile, the strengthening yen hit tourist demand in Japan.
“Q2 earnings confirmed the widening gap in performance between leather goods and jewellery. For everyone, jewellery has been doing well, not only Richemont but also LVMH, Hermès and Kering,” says Charles-Louis Scotti, head of luxury goods equity research at Kepler Cheuvreux. “Whereas volumes in the leather goods category are collapsing, except for Hermès, Miu Miu and Loewe. And in luxury, there’s not much you can do when it comes to volume pain. You cannot lower prices.”
At LVMH, watches and jewellery sales, including at Tiffany and Bvlgari, were flat in Q2, while group sales were down 4 per cent; at Hermès, other sectors including jewellery were up 14.9 per cent. Kering doesn’t break down sales of its other houses division, which includes Boucheron, Pomellato and Qeelin, but group CFO Armelle Poulou said that jewellery houses “proved resilient in Q2”. Kering deputy CEO Jean-Marc Duplaix said that Boucheron is doing well and is continuing to grow its team.
Price discipline was another factor that separated the haves from the have-nots, according to Édouard Aubin, managing director at Morgan Stanley. He notes Cartier, Van Cleef Arpels and Hermès as outperformers. All have increased prices less than their peers in previous years. “Players who have been the most price disciplined over the past five years got rewarded,” Aubin says.
Amid market challenges, Hermès said its loyal customer base — who continue to buy bags, jewellery and ready-to-wear — has allowed it to ‘hold up well in the maelstrom’.
The earnings showed the continuing strength of quiet luxury. Brunello Cucinelli published sales up 10.5 per cent in the first half, Hermès reported sales up 9 per cent in the second quarter, and, during the LVMH Q2 call, Cabanis called Loro Piana “the fastest-growing quiet luxury brand”. On whether the group is expecting an impact of the supply chain concern on Loro Piana’s brand perception, Cabanis replied: “It’s not going to create — and it shouldn’t create — an impact on the image because it’s not what happened. Still, we need to make sure that collectively, with everyone, we can solve or at least improve the [supply chain] situation in the industry.”
Last but not least, the Prada brand turned into negative territory in Q2 (-4 per cent) after a flat Q1, while Miu Miu, which has been on a hot streak, posted 40 per cent retail sales growth. That’s a significant deceleration for Miu Miu, after sales rose 93 per cent in 2024. Still, a 40 per cent rise defies the odds in the current context, and the brand remains in expansion mode. Prada Group CEO Andrea Guerra sees more opportunities for Miu Miu in retail expansion and leather goods. “We are catching up but there is still a long way to go,” Guerra said.
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2. Tariffs talk
There were surprisingly not a lot of concerns regarding tariffs, despite the announcement in the middle of the earnings season (27 July), of a 15 per cent US tariff on European imports. “Fifteen per cent is eminently manageable for the sector. It’s not a big deal, plus it’s good the uncertainty is removed,” says Solca.
Rambourg says: “The 15 per cent tariff is applied to whatever your headquarters invoices your subsidiary — whether it’s cost of goods or a fraction of cost of goods, it’s obviously applied to a lower number than the actual sales. That’s why there was a rule of thumb that if it’s a 15 per cent tariff, a price increase in the US of 4 to 5 per cent should offset that.” Some have already passed the increase onto the consumer. Hermès raised its prices by 5 per cent in the US in May. During the Hermès Q2 earnings call, executive chair Axel Dumas said: “We’re waiting for more details… For the moment, we do not foresee any change.”
For the Swiss watch industry, it’s a bigger blow. Switzerland woke up on Friday to news that US President Donald Trump had imposed a 39 per cent tariff on Swiss imports, starting 7 August — worse than the 31 per cent levy announced on 2 April. (A 10 per cent tariff has been in temporary effect since.) “This could cause pain in Richemont, but especially in Swatch Group and Watches Of Switzerland today. The one-week hiatus until implementation suggests this could be a negotiating tactic,” wrote Jefferies analysts in a note on Friday.
Vogue Business breaks down tariffs by country and what the rates mean for fashion.
3. Cross-border travellers
A significant change from the first to the second quarter is a dip in international travel, which is largely influenced by currency fluctuations. This has led to fewer Americans travelling to Europe (Hermès also noted that events in the Middle East meant tourism flows to France from the Middle East declined in June), but the most notable shift is the decrease in Chinese visitors to Japan.
“In my view, it tells you that the luxury consumer remains price sensitive, because when you see these currency movements impacting the price of luxury goods, it has an immediate impact on spending. As we can see, middle to upper-middle income consumers are still an important category, and they are price sensitive,” says Morgan Stanley’s Aubin.
Overall, companies are struggling with aspirational customers. At Hermès, this was reflected in the sales drops among fragrance and belts, which have also been affected by the decline in footfall, Dumas said.
4. ‘Cost containment’ and ‘efficiencies’
After Burberry announced its plans in May to lay off around 20 per cent of its workforce (1,700 jobs) by 2027, the second-quarter earnings calls of other players have revealed further cost-reduction measures.
As Kering profits fell 46 per cent in the first half of 2025, the group said it has reduced its headcount by 4 per cent since December 2024; at its largest brand Gucci, headcount is down 22 per cent compared to its 2022 peak. “It means that today, Gucci in terms of employees is below the level of 2019,” Kering’s Duplaix told analysts.
Kering also said it plans to close 80 stores this year. It hasn’t slashed its marketing expenses, however. Its advertising and promotion budget remains a high-single-digit percentage of its full-year revenue. “This allows us to sustain brand visibility, to amplify the debut of designers in the second half [of the year], while adapting to the current environment, focusing on relative intensity and on the highest ROI [return on investment] initiatives and campaigns,” CFO Poulou said. It makes sense as Kering needs to support designer debuts at three of its key houses: Gucci, Bottega Veneta and Balenciaga.
Rambourg thinks that, in general, any industry client facing expenses will remain. “You’re not really cutting marketing spending. You are cutting office-based jobs and cancelling or postponing events and store openings,” he says.
Prada Group is accelerating when it comes to advertising and communication expenses (up 16 per cent year-on-year in the first half of 2025 to represent 9.3 per cent of the group’s revenue, above historical average). “The priority is growth, the priority is to continue to invest behind the brand, particularly at a time where we see some of our competitors actually stepping back a little,” Prada Group CFO Andrea Bonini said. “Considering the performance of the group, we see it as a great opportunity to accelerate and do what we do to be top of mind.”
At LVMH, CFO Cabanis spoke about “initiating long-term structural efficiencies beyond short-term mitigation efforts”. Pressed to expand on the structural efficiencies, she said it can range from the way of investing in stores to the way of working with agencies on fashion shows, “paying margin only on the creative part and making sure that you are the most efficient possible on costs that are not related to client experience or creativity”.
5. New creative direction
The earnings also offered updates on designer debuts.
Cabanis stressed that Jonathan Anderson’s men’s debut at Dior reached 1.1 billion views on social media. “We’ll all have to be patient because going from the first men’s show until the collection actually hits the stores, it will take a bit more time. In the short term, we have some initiatives and catalysts, especially the two store openings in New York and on LA’s Rodeo Drive, which are coming soon,” he said.
The designer’s first men’s collection was a sign of what’s to come as the French house enters a new era. It was met with much enthusiasm from the fashion crowd.
Kering deputy CEO Francesca Bellettini told analysts that new creative director Demna will hold a presentation for the brand in September. “It’s a full collection that will remind people what Gucci is. It’s just not presented as a fashion show,” Bellettini said. While the full collection will be available in stores from the beginning of January, she added that certain outposts will begin receiving new designs from that collection as early as September. His first runway show will be in March for the Autumn/Winter 2026 season.
Bellettini insisted on the regular injection of novelty in the stores. “There is also going to be a Christmas capsule that has been already worked on by the team. There is gonna be a project for Chinese New Year. I just would love everybody to defocus a little bit on the collection of Demna, the collection of another designer. There is a company, there is a brand, and there is a constant work of all the team in, in presenting new collections and new products and working on the carryover,” she said.
“What’s interesting in the Kering communication is that they’re playing down the importance of the designer,” Rambourg notes. “I think there has been a tendency, understandably, because of how designer dependent Gucci has been in the past — whether it was with Tom Ford or Alessandro Michele — to focus all the attention on the designer. I think they’re very keen at Kering to say: ‘The designer is great and we’re very hopeful that he will help us move the needle, but there are a lot of things happening in the background that, regardless of when he arrives and who he is, that hopefully will help the brand start to see a better trend.’”
Vogue Business unpacks the priorities for the luxury group’s new chief executive, Renault head Luca de Meo.
On Bottega Veneta’s new creative director Louise Trotter, Bellettini said: “We also have very good signs of improvement of performance in certain product categories that are not handbag, specifically ready-to-wear. We expect this to be stronger with the arrival of Louise, who will present her first collection in September. The transition is going very well, and she’s fully integrated with the team.”
Demna and Trotter will be two of the dozen creative directors starting at the same time across both Milan and Paris Fashion Week. “The optimist view is that it could help the sector, even if the end customer demand remains a bit weak. Supply creates its own demand in fashion like in other sectors,” says Aubin.
The debate among investors related to the high-stake SS26 season? Will all the designer debuts result in a zero-sum game because the pie might not be growing, or will the surge of creativity boost interest from consumers for the sector overall?
