Luxury brands across the board are expected to boost prices in the wake of Trump’s announcement of a “Liberation Day” tariff tranche. “We expect all brands to implement price increases in single-digit percentages in the U.S. in the coming weeks and to identify cost-savings opportunities in their U.S. and global operations to mitigate some of the tariffs’ impact,”Thomas Chauvet, luxury analyst at Citi, stated in a note this week.
While luxury companies’ stock prices slipped this week in response to the news, he asserted that the impact of impending tariffs on luxury sector earnings per share “might be overdone considering luxury companies’ intrinsic pricing power and relatively low price elasticity of demand.” In particular, he pointed to companies like Hermès and Richemont, which have “strong pricing power and higher-end positioning,” as among those that “might find it easier to mitigate the impact through pricing,” whereas others will inevitably have to assume some of the new costs on their end.
A provision in Ferrari buyer contracts confirms what is likely to come. “Purchase contracts for Ferraris have clear and standard clauses allowing the company to adjust prices in case trade conditions change before the vehicle’s delivery,” a Ferrari spokesperson stated this week in response to the tariffs slated to hit the Italian automaker.
A provision in Ferrari buyer contracts confirms what is likely to come. “Purchase contracts for Ferraris have clear and standard clauses allowing the company to adjust prices in case trade conditions change before the vehicle’s delivery,” a Ferrari spokesperson stated this week in response to the tariffs slated to hit the Italian automaker.
> Price adjustment clauses will be critical for companies now and going forward. Companies are encouraged to include these clauses (and to explore broad force majeure clauses) in future contracts to address the potential for further tariffs or import fees disruptions
Trump unveiled a 10% minimum tariff on most goods imported to the U.S. A 20% rate will apply to goods coming from the European Union, plus 25% tariffs on all imported cars starting next week.
At the same time, Ferrari revealed that it will increase prices by a maximum of 10 percent on some of the models it sells in the U.S., including cars that were ordered – but not delivered – before the onset of Trump’s new tariffs.
In addition to cars, luxury watches are expected to take a hit, as Switzerland assumes a 31% tariff rate. JPMorgan analysts said in a note that they expect to see significant pressure on Swiss watchmakers given high import duties.
Environmental Action Germany has successfully challenged major brands Lufthansa and Adidas in court over misleading sustainability claims. In separate rulings, German regional courts sided with the NGO, highlighting how both companies misled consumers with vague or exaggerated promises about their environmental efforts.
In the case against Adidas, the Nuremberg-Fürth Regional Court ordered the company to stop advertising its claim of becoming climate neutral by 2050, citing a lack of concrete plans beyond 2030. The lawsuit was brought forward by environmental watchdog Deutsche Umwelthilfe (“DUH”), whose managing director, Jürgen Resch, criticized the sportswear giant for relying on unregulated offset projects instead of taking meaningful steps to reduce actual emissions.
“Offsetting is not the same as cutting emissions,” Resch said. “The climate crisis demands more than vague promises.” Resch accused Adidas of giving the illusion of climate action without delivering real progress. DUH emphasized that misleading climate neutrality claims can significantly influence consumer behavior and called for stricter rules and penalties to curb greenwashing.
Adidas will not have to take any action resulting from the court ruling, as the claim was adjusted in August 2024. “Our plans and targets on reducing emissions remain unchanged by the judgment,” a company spokesman said.
The RealReal released its latest circularity report, “outlines how resale is imperative to reducing the fashion industry’s environmental impact – and how keeping ‘old’ items in circulation and out of landfills is a world-changing initiative and the future of personal style.” Here are a handful of the key factors/figures …
> Clothing utilization – or how often we wear something before discarding it – has decreased by 36% compared to 20 years ago.
> Shoppers today buy, on average, 53 new items of clothing a year (a five-fold increase since 1980), and more than 50% of fast fashion today is disposed of less than one year after purchase.
> In 1975, synthetic fibers accounted for just 30% of global textile production: now they account for 69% and are projected to increase to 73% by 2030.
> Resale is “more popular than ever,” per TRR, which says that its membership has increased by over 150% in the past five years.
The most striking aspect of the report is a trademark one. According to the resale giant report, “‘Old’ is in. And by ‘old,’ we just mean anything that already exists.” Specifically, the company claims that consumers are looking for unique pieces and a more edited wardrobe than ever before: 69 percent of The RealReal shoppers say The RealReal “helps them curate their wardrobes,” while 31 percent say that, since 2020, they now focus on “buying fewer, more special luxury pieces.” Among those “special” pieces? “Things no one else will have … ‘dead’ brands (Claude Montana, Sies Marjan) or beloved eras of their favorite fashion designers (Tom Ford at Gucci, Nicolas Ghesquière at Balenciaga).”
This nod to enduring demand for – and sales of – “dead” brands (complete with use of their trademarks) makes me think of the outcome in the Ferrari “Testatrossa” case, in which the the Court of Justice of the European Union ruled that Ferrari can retain the rights in its Testarossa trademark, even though production of the iconic sports car was discontinued in the 1990s.
While there are certainly some nuances to be discussed (soon!), there may be a branding-specific benefit that comes from the secondary market: It could be argued that the enduring market for these goods is helping to keep trademarks that might otherwise be dead … alive.