The Perfect Storm Hits Luxury

Luxury brands are facing a significant downturn as tourist spending on high-end goods plummets in Europe and Japan. Currency shifts have eliminated the financial incentives that previously drove American tourists to shop in Europe and Chinese tourists to splurge in Japan. Major players like LVMH, Prada, and Moncler reported declining sales, with LVMH's fashion division dropping 9% in Q2 2025. The US dollar's 10% decline against the euro and the yen's recovery have reversed last year's boom conditions. Combined with weak consumer confidence in China and fragile demand in the US, analysts have revised 2025 luxury industry forecasts from +5% growth to -2% decline. The crisis exposes deeper issues around aggressive pricing strategies and over-dependence on currency-driven tourist spending rather than sustainable brand value.

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