Luxury brands face challenges as tourism decline in Europe, Japan

(MENAFN) Luxury brands are seeing a dip in sales across Europe and Japan as spending by American and Chinese tourists slows, the Financial Times reported. Once key contributors to luxury market growth, these tourists are now cutting back on international purchases.

In 2024, luxury sales surged thanks to favorable exchange rates: Chinese shoppers flocked to Japan amid a weakened yen, and Americans boosted spending in Europe with a strong dollar. However, these trends have reversed in 2025. The yen has rebounded, and the dollar has weakened following new tariffs imposed by US President Donald Trump, dampening cross-border luxury purchases.

Cécile Cabanis, CFO at luxury giant LVMH (which owns Louis Vuitton and Dior), said the company saw a 9% organic drop in second-quarter sales in its fashion and leather goods segment, citing a sharp decline in spending by American tourists. She added that dwindling tourist purchases in Japan were not compensated by local buyers.

According to the FT, US demand may decline further as tariffs drive up the cost of imported goods. Reflecting this, investment firm Bernstein revised its luxury sector growth forecast for 2025 from a 5% increase to a 2% contraction.

Bernstein analyst Luca Solca argued that the slump in tourist shopping reveals deeper issues in the industry. Luxury brands, he said, raised prices excessively during the boom years, pricing out many buyers. “Chinese tourists aren’t in Japan just to see Mount Fuji,” he said. “Too many luxury brands went too far with price hikes.”

Despite the downturn, luxury labels like LVMH remain reluctant to offer discounts, sticking to a high-price strategy to preserve brand exclusivity and margins.

A Bain & Company study noted that the global luxury consumer base shrank by about 50 million between 2022 and 2024—from 400 million to 350 million—due to economic instability and rising costs.

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