Tariffs: The threat of tariffs looms large in the industry, but how and when they will be imposed remains unclear. The industry is waiting to see if President-elect Trump will view tariffs as an outcome and fulfillment of a campaign promise or as a tool in negotiations, and whether he will act through executive action, a strategy he used in his first term and President Biden continued, or seek new authority through congressional action. The new Congress will be under significant pressure to extend tax cuts for individuals enacted by the 2017 Tax Cuts and Jobs Act (TCJA), and tariffs might represent an attractive source of replacement revenue.

Environment, Social, Governance (ESG): ESG is, and will continue to be, an increasingly important driver of business value. Not only are businesses willing to pay a premium for target companies with strong ESG profiles, but investors take ESG factors into consideration in investment decisions and want to see companies disclose the monetary value of their ESG impact. Not all ESG initiatives are weighed equally.  Factors that have a more quantifiable and direct impact on a company’s bottom line, such as changes to sourcing of raw materials, have a bigger impact on valuation. 

Sustainability: There is likely to be an increasing role for states to issue legislation aimed at regulating the social and environment impact of the fashion industry. The California Responsible Textile Recovery Act of 2024 and the proposed New York Fashion Act are examples. Luxury clothing companies should also consider offering its customers buy-back programs and repair programs, creating alternative revenue streams, especially in light of inflation and decreased demand.

Jewelry: The principal issues in the jewelry industry are packaging regulations, sanctions and greenwashing claims. The new Digital Products Passport regulation will require brands to digitally disclose certain information about their products, including the manufacturing process and traceability and sustainability of materials. Although burdensome, the regulation offers brands a chance to build trust with consumers. However, brands must substantiate their claims and can no longer don a “green halo” without responsibility for their actions.

Storytelling, Authenticity and Experiences: Across the hospitality, jewelry, or fashion industries, storytelling, authenticity and experiences are integral to maintaining brand identity. In an environment of endless options, expensive products, and decreased appetite for spending, storytelling is key to the consumer relationship. For example, the ability to trace a piece of jewelry and its raw materials to their origins offers a storytelling opportunity and creates additional value for consumers.

M&A: During the past four years, luxury brands have had to be creative to circumvent antitrust pitfalls, employing investment and licensing structures in lieu of traditional acquisitions. The Trump administration will likely be more favorable to M&A deals and will adopt more traditional theories of harm under antitrust laws, opening the door to further consolidation in the industry in the U.S.