Luxury in motion: U.S. luxury retail persists in the face of uncertainty
Key findings
Steady amid storms: Luxury firms face economic uncertainty and tariff headwinds, yet newly opened retail square footage has maintained a similar pace compared to recent years.
Street retail still tops: Luxury retail remains dominated by street-level locations, with 59% of new stores opened from July 2024 to July 2025 situated in street retail rather than malls.
New York leads the pack: New York continues to lead as the top destination for new luxury store openings, with Madison Avenue, Fifth Avenue, and SoHo ranking as the three most active urban districts nationally.
Conglomerates feel the pinch: In the first half of 2025, many leading luxury conglomerates, including LVMH and Kering, reported declining revenues amid challenging market conditions.
Tariff troubles loom: Many luxury brands have identified proposed and enacted U.S. tariffs as potential near-term headwinds. In response, some companies have shifted manufacturing locations and adjusted product lines.
Youth drives growth: Current luxury growth is being driven primarily by Gen Z and Millennial consumers. Brands like Coach, Miu Miu, and Byredo have achieved outsized growth by successfully appealing to younger demographics.
Luxury retail faces uncertainty, but store growth continues
A year ago, global luxury firms were well-positioned, having enjoyed multiple years of post-pandemic growth. Now, several headwinds have emerged, including economic uncertainty and tariff concerns. While some luxury brands and conglomerates have reported declining revenues, these headwinds have not yet translated into significantly reduced store openings.
New luxury retail space has declined modestly:
- In 2024, newly opened luxury retail square footage fell by 14.3%.
- In the first half of 2025, newly opened luxury retail square footage increased by 65.1% compared to the same period in 2024.
While the full-year 2025 results remain to be seen, current trends suggest luxury retail expansion will approach 2024 levels.
New luxury retail square footage increased by 65.1% in H1 2025
The fourth quarter remains the peak season for luxury openings, with Q4 2024 delivering 195,563 square feet—the highest quarterly total in our data series. Notable openings during this period included Louis Vuitton (East 57th Street), Giorgio Armani (Madison Avenue), and Dior (Highland Park Village, Dallas).
- Despite economic uncertainty, Q1 2025 opened 146,888 square feet of luxury retail space.
- Luxury retailers consistently favor fall openings for maximum holiday impact, while summer quarters typically show lower activity as brands prepare for peak shopping seasons.
- While Q2 2025 showed a seasonal dip to 79,625 square feet, the figure still exceeded most quarters in 2024.
Luxury loves New York
New York City continues to attract interest from luxury brands seeking to establish or expand their presence in the U.S., with 42 new luxury openings between July 2024 and July 2025—a significant increase from the 34 openings reported last year.
The combined Southern California cities (Beverly Hills, Los Angeles and Costa Mesa) collectively captured 19 luxury openings, demonstrating the continued appeal of the broader L.A. market.
The 9 new openings at South Coast Plaza in Costa Mesa and the 4 openings at Simon Properties' Southdale Mall in Edina, Minnesota show that luxury brands continue to leverage established mall operators and existing luxury co-tenancy to expand into both traditional and emerging markets.
This year’s decline in international visitors to gateway markets such as New York City, Los Angeles, and Miami is expected to impact luxury retail. NYC Tourism + Conventions now projects a 17% decline in international travelers from its previous estimate. However, domestic tourism remains robust and may partially offset the revenue lost from international luxury shoppers.
Constrained construction creates premium for quality retail space
New construction of retail space persists at historically low levels, impacting the availability of quality vacant space for luxury retailers. Construction activity has fallen to just 48.3 million square feet under development, with Q2 2025 new construction starts falling over 50% quarter-over-quarter to only 4.9 million square feet. Rising construction costs continue to outpace rental growth, while strong demand for multifamily and mixed-use projects increases the opportunity cost of building dedicated retail space.
This scarcity is forcing luxury retailers to compete for existing premium locations. For investors, this environment suggests that high-quality retail properties in prime luxury corridors—while requiring significant upfront investment—may command better returns given the constrained supply pipeline and continued demand from prestigious brands.
Luxury brands expect tariff, consumer headwinds
The uncertainty in trade policies remains a significant concern, influencing investment and long-term planning across the sector.
- Capri Holdings anticipates an $85 million increase in cost of goods sold for fiscal year 2026 due to tariffs.
- Tapestry's Kate Spade brand is significantly impacted by 20% Southeast Asian import tariffs, prompting a 30% reduction in handbag styles to mitigate margin pressures, with the company projecting a total $160 million tariff-related cost for fiscal year 2026.
- Richemont faces headwinds from an expected 39% U.S. tariff on Swiss watches.
- LVMH is strategically expanding local production in the U.S. with a second Louis Vuitton facility in Texas to reduce import costs and enhance market responsiveness.
- Kering expects that announced tariff increases could negatively impact profit margins, particularly on products sold in the U.S.
Gen Z & millennials drive sales growth
Younger shoppers are actively reshaping the luxury landscape, and the brands that successfully appeal to them are discovering revenue growth.
Tapestry's Coach brand achieved a 14% sales increase in fiscal Q4 2025, and 10% for the full fiscal year, with Gen Z and Millennials making up 60-70% of new North American customers due to product relevance and effective marketing.
Prada Group's Miu Miu saw an exceptional 49% retail sales surge in the first half of 2025, successfully leveraging viral marketing and pop culture to appeal to younger consumers.
Puig's Fragrance and Fashion segment recorded an 8.6% like-for-like growth in the first half of 2025, driven by Gen Z and Millennials seeking unique, personalized, and gender-fluid fragrances, exemplified by brands like Byredo.
OTB Group's Diesel brand achieved 3.2% revenue growth in 2024, successfully re-engaging younger demographics through Y2K aesthetics, bold designs, and a strong social media presence.