American luxury has surpassed European luxury in terms of profitability. Will it be able to maintain its position?

The American brands Coach and Ralph Lauren have outperformed global luxury market leaders from Europe, including LVMH and Gucci, over the past five years, both in terms of shareholder returns and sales growth. Their success is attributed to their focus on a young audience, moderate prices and active investment in image. But analysts warn: further growth may be jeopardized by duties and possible cooling of consumer demand.

Over the past five years, American brands - which own Coach Tapestry and Ralph Lauren- have delivered the biggest gains for shareholders, while well-known European luxury houses such as LVMH and Burberry have performed much more modestly, The Wall Street Journal reported.

According to FactSet data cited by the publication, Tapestry delivered a 46.04% return to shareholders over the five-year period ending August 28, 2025. In second place was Ralph Lauren with a return of 36.35%.

Since the beginning of 2025, Tapestry and Ralph Lauren's shares have risen 57% and 29%, respectively. As the WSJ notes, these two companies no longer trade at a strong discount to European luxury companies on a price-to-earnings (P/E) projection basis. And the latest reporting season showed a growing gap between the results of European and U.S. brands. Coach's sales last quarter were up 13% year-over-year, while Ralph Lauren's were up 11%. At the same time, LVMH's sales in the fashion and leather goods segment were down 9%, while Gucci's fell about 25%.

Some European brands aimed at the super-rich, such as the Italian brand Brunello Cucinelli and the French house Hermes, are trying to keep up with the Americans, writes WSJ. Thus, Brunello Cucinelli was the third best return for shareholders over the past five years with a 34.12% return. French Hermes is behind it with a 22.66% return.

The fifth line was taken by the Swiss group Richemont, which owns the brands Cartier, Van Cleef & Arpels. The return for investors over the five-year period amounted to 20.6%. It is followed in the top by the Italian brand Moncler, specializing in premium outerwear, which provided investors with 10.3%, and Prada with the result of 9.2%.

LVMH, the world's largest luxury brand group, showed more modest results - 3.7%. At the very bottom of the table were Capri Holdings (Michael Kors, Versace, Jimmy Choo) and British Burberry. Their profitability is practically zero or negative, writes WSJ.

Coach and Ralph Lauren are showing growth in a difficult market, in part by targeting younger audiences. Coach said it added 1 million new customers in North America in the last quarter, most of them Generation Z and millennials, The Wall Street Journal noted.

European brands may have unwittingly helped their American competitors by raising prices too quickly in recent years, leaving young and middle-income buyers without affordable options. On Gucci's website in the U.S. today you can find only three bags cheaper than $1,000, while Ralph Lauren has more than 150 such models, the newspaper said. According to Bank of America, Americans are spending the smallest share of disposable income on luxury goods as of 2019, so with rare "shopping sprees," shoppers are looking for the most value for their money.

In addition, Coach and Ralph Lauren have been investing in image for years: their advertising spending has grown to about 10% and 7% of revenue, respectively, up from about 4% previously. "In the past, a person who was considering buying Louis Vuitton would never have picked up a Coach bag," says Bernstein analyst Anisha Sherman. Now, however, they are seen as a more affordable alternative.

That said, more expensive brands are unlikely to compete directly with Coach or Ralph Lauren. The owner of Louis Vuitton recently ruled out bringing back a younger audience with "cheap handbags": he wants customers with new lipsticks for $160 and better quality bags, writes WSJ.

In addition, US companies are at an earlier stage of expansion and have room to grow. China is still a small share of their sales, although they are starting to attract price-sensitive buyers in that market who are shifting to more affordable luxury. Last quarter, Ralph Lauren's sales in China were up 30% and Coach's were up 22%, while European brands slowed, the WSJ wrote.

In contrast, the high dependence on the U.S. market remains a plus for Tapestry and Ralph Lauren, the newspaper noted.

Tapestry and Ralph Lauren expressed caution in their forecasts due to possible consumer reaction to fall price increases due to duties. Both companies have recently boosted revenue by raising prices and cutting discounts. Coach, for example, has raised prices in 20 of the last 22 quarters, the WSJ wrote.

At the same time, the potential for growth remains: if earlier the products of European luxury houses cost about twice as much as Coach, now - already ten times, said the CEO of the company Todd Kahn. According to him, the brand has room for further price increases, but the main segment remains the $200-500 range, which is especially attractive to young buyers. "We want to play in price points that appeal to a younger audience," Kahn emphasized.

It is important for American brands not to repeat the mistakes of European competitors, who, excessively raising prices, narrowed their own customer base, the publication notes.

But European competitors are not giving up either. The next stage for the luxury industry could be a time of revenge for Europe: more than a dozen brands, including Gucci, Bottega Veneta and Chanel, have hired new creative directors. The first collections will be shown in September, and only in two or three quarters - the time it takes for the runway pieces to hit stores - will it be clear whether they can revive sales, the WSJ says.

This article was AI-translated and verified by a human editor