Luxury goods companies faced potential price hike challenges due to a 15% tariff in the EU-U.S. trade deal. Big brands like Chanel and LVMH’s Louis Vuitton have relied on price increases for profit growth. The luxury industry is already facing declining sales globally, relying on the U.S. as China falters.

Despite the tariff, luxury brands are cautious about further price hikes to avoid alienating younger shoppers. Bernard Arnault of LVMH lobbied for a new Louis Vuitton factory in Texas, but European brands may find this costly. Some labels have pricing power to offset tariffs, but others may struggle due to past price increases.

Luxury brands saw a 33% increase in prices between 2019 and 2023, driving sales growth. However, the industry lost 50 million customers last year due to economic pressures and price fatigue. Brands like Hermes, who held back on price increases, have outperformed rivals. UBS estimates a 15% tariff will require brands to raise prices by 2% in the U.S.

The luxury industry faces challenges as earnings show little rebound. LVMH’s sales missed expectations, while Moncler and Gucci are struggling. There has been a disconnect between luxury prices and perceived quality, leading to a decline in sales. Bain predicts a 2-5% fall in luxury sales in 2025, prompting a recruitment drive for new designers.

Read more at Yahoo Finance: Analysis-US tariffs will be test of luxury brands’ pricing power