LIVE MARKETS-Tariffs may drive US luxury shoppers abroad - UBS
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TARIFFS MAY DRIVE US LUXURY SHOPPERS ABROAD - UBS
European luxury brands would need to raise prices in the U.S. by an average of around 2% to offset the impact of new tariffs, UBS says, cautioning the move could test the American consumer and potentially push them to shop abroad.
The trade deal sets a 15% tariff on European luxury exports - down from 20% initially, but will still hit margins. Without price hikes, the Swiss bank estimates sector EBIT could fall by 3%. A 1% global price increase would be enough to offset the impact.
Some brands aren't waiting.
Cartier-owner Richemont CFR.S, Swatch UHR.S, LVMH LVMH.PA, Hermes HRMS.PA, Moncler MONC.MI, EssilorLuxottica ESLX.PA and Ferrari RACE.MI have already started lifting prices, per UBS data. Others have signalled they will follow.
Even though a 2% hike looks easily manageable for luxury consumers, UBS is cautious.
"It will be important to watch the demand in Q3 as it remains unclear if the US consumer resilience may have been driven by pre-emptive buying ahead of tariffs," write UBS analysts including Zuzanna Pusz.
"Net-net such tariffs will likely further incentivise American luxury consumers to shop abroad due to the likely widening regional price gaps (~10%) in addition to the VAT refund in Europe," they add.
(Danilo Masoni)
EARLIER LIVE MARKETS POSTS:
MEGA CAPS AREN'T POWERING THE 'MEGA' TRADE CLICK HERE
EARNINGS DECENT, IN AGGREGATE, STOXX UP CLICK HERE
EUROPE BEFORE THE BELL: LOTS OF EARNINGS CLICK HERE
MORNING BID: REMEMBERING THE DOWNSIDES TO TARIFFS CLICK HERE
