We are nearly at the mid-year point, and what a year 2025 is turning out to be. Who isn’t afraid to read the newspaper or watch the news? Never fear, I’ve done the hard part for you by monitoring the global situation to understand how world events impact the niche perfumery sector. Let’s start with a look at general category sales before diving into current hot topics.

Fragrance Performance

The fragrance sector as a whole continues to see growth, though certain categories are slowing down. Over the past few weeks the conglomerates gave performance reports, which on the surface are discouraging:

• LVMH perfume and cosmetics sales dropped 1% in Q1 2025;

• Hermès was relatively flat;

• Estee Lauder Companies: For the first three months of 2025, fragrance net sales were down 1% HOWEVER the luxury brands had low single digit increases and Le Labo enjoyed double digit increases;

• Kering’s Beauté division, driven by Creed, delivered + 6% for Q1 2025, outperforming most of the group’s fashion portfolio.

• Coty reported a 6% overall decrease, with the Prestige category at -4%

• Puig, whose roster includes Byredo, is the star, delivering an 8% rise in Q1 sales, and healthy business across all categories from Prestige to Niche. In an interview, Chairman and CEO Marc Puig said “Once again, our largest segment—Fragrances and Fashion—is our top performer, which is a testament to the strength of our Prestige and Niche brands.”

Nevertheless, market research company Euromonitor is bullish on fragrance, expecting experiential shopping propositions, sustainability and a new vision of luxury – one that includes wellness and authenticity – to be key drivers promoting growth.

Price Resistance? Not When it’s Authentic

Meanwhile, in the ultra-luxe category, Omani-based brand Amouage, reported a 48% increase in sales, posting $100 million in retail sales in its first quarter. Chief executive Marco Parsiegla indicated that the Exceptional Extracts range, which runs about 520€ per bottle, accounts for nearly one-third of sales. He also noted that more than 80% of the clientele is younger than 45.

Clearly the big groups are watching what’s happening and they want their piece of the pie. Yet perhaps part of the challenge they face is a question of authenticity when it comes to premiumization. Brands like Armani, Prada and even Paco Rabanne generate the bulk of their sales from department stores, travel retail and other mass channels where price points are below 150€. Simultaneously, many of these fashion brands have existing – or are launching – high end, exclusive collections with a ticket price upwards of 300€. Witness, in addition to Armani Privé and Prada Olfactories, Les Eternels de Balmain (parent Estee Lauder), YSL Le Vestiaire (parent L’oreal) Givenchy La Collection Particulière (parent LVMH) and even La Collection Rabanne (parent Puig) and so many others. Are these premium, luxury collections viewed as worth the investment? How do the brands convey the point of difference between these offers and their bread-and-butter fragrances? And, most importantly, is the consumer convinced?

Daniel Langer, one of the “Global Top Five Luxury Key Opinion Leaders”, cautions brands against taking actions for short term gains at the expense of long-term brand equity.

The Fall of Retail in North America

Department Store Decline

Economic instability, high inflation, rising rents, “smash & grab” theft, and shrinking foot traffic have created a “perfect storm” for the collapse of brick-and-mortar stores in the US and Canada. These are sad times for the department store model, as iconic retailers are closing their doors.

In 2023, Nordstrom closed 15 stores.

Macy’s will close 150 underperforming stores over the next three years.

Canada’s Hudson's Bay (HBC), often referred to as The Bay, has collapsed. Originally established as a fur trader in 1670 before becoming a retailer in the 1800’s, it’s an institution that’s older than Canada itself. The Bay has been an essential launching pad for emerging beauty brands. Who will pick up the slack? As the retailer prepares to shutter 88 stores by mid-June, 9,400 people will be jobless, and some brands are left with significant unpaid invoices.

HBC used to own Saks Fifth Avenue which last year was spun off into Saks Global, a holding company of luxury department stores including Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman. Now these luxury stores have their own problems as Saks Global is struggling to find financing. Vendors are owed hundreds of thousands of dollars; the CEO has said payment will have to wait.

San Francisco, my former hometown, is decimated. Saks San Francisco closed May 10, 2025. The retailer had moved to an appointment only format in the summer of 2024 which clearly was not successful. This follows the closure of Nordstrom in 2023, Bloomingdale’s in March of this year and now Macy’s will also close once a buyer for the building is found. Neiman Marcus will be the only game in town.

And speaking of which, Neiman Marcus Dallas was supposed to close March 31, 2025 due to the inability to renegotiate the lease with the landlord. Now the store will remain open until the end of the year. Perhaps there is a chance this retail institution which opened in 1907 (before Selfridge’s in London!) will be saved.

Specialty Retail Reslience

Specialty beauty retailer Space NK closed its American freestanding stores in 2020, opting for shop in shop formats, but now with the ongoing tariff uncertainties, they have, at least temporarily, paused e-commerce in the US.

The bright spot is in specialty beauty retailers. Blue Mercury, a beauty destination owned by Macy’s since 2015, announced, at the end of 2024, plans to open an additional 30 stores and renovate 30 others, bringing the nationwide store count to just over 200. Sephora North America is pursuing an aggressive plan to redesign all of its freestanding stores.

What About e-Commerce?

Remember when e-commerce was driving as much as 40% of total sales? Times have changed. Whereas online shopping had a heyday thanks to the pandemic, consumers are back in the stores. Brick-and-mortar shopping has evolved beyond transactions, enticing the shopper with unique experiences, cool design, welcoming environments, digital tools and more. Although luxury retailers now seem compelled to open an Instagram-worthy café within their walls, it’s still debatable whether shoppers are buying more than a coffee when they come to hang out all afternoon in the store with their friends taking photos.

Strangely enough, now is the moment Saks Fifth Avenue is opening on Amazon. The project, which has been in the works for six years, allows the retailer to sell a curated selection of luxury products online . The assortment is contained in a “walled garden” meaning internet walls are supposed to be high enough to block the consumer from seeing knock-offs and lower priced goods. Currently live in the US, a rollout is planned to open on Amazon sites in the UK, India, Japan, Europe and the Middle East.

Tariff Trauma

With just over one hundred days in office, US President Donald Trump has thrown the world into a head spin over his on again, off again tariff strategy. What’s the word on the street?

“It’s more the uncertainty than the tariffs themselves”, François Duquesne told me recently. The CEO and founder San Diego-based Maison Duquesne, an incubator of independent perfumery brands continued. “April was a difficult month, we had some orders cancelled, but I’m expecting and witnessing a rebound in May”. US companies who have relied on sales in China are in the biggest bind: raise prices at the risk of losing customers who will buy local brands or absorb the duties and watch margin dwindle. Companies who rely on China for packaging and components are on edge, and are perhaps looking to find a supplier in a new geography.

European companies who deal with the US are reviewing strategies effecting pricing, production and cost reduction. Thomas Joly, General Manager, Uni President Glass is currently not impacted by the measures of the new Trump administration and the tariffs because he mainly buys in Asia and most of his customers are in Europe. However, he has reservations.

As we go to press, the US and China have placed a 90-day pause on heavy tariffs, unleashing a rash of activity as China scrambles to ship out inventory. We can only wait and see how this will play out.

Shifting to the consumer side, market research companies are finding a fairly cautious sentiment where trust in the brand carries more weight than price, unless that was already an issue. A survey conducted by UserTesting concluded that two-thirds of the consumers in the US, UK and Australia are willing to pay an average of 25% more for their favorite brands. What matters more than price is the customer experience, the quality of the product and the whether or not it’s a familiar brand.

On the other hand, Bain Consultancy found in their poll of luxury consumers, that 75% don’t find tariffs to be the problem. Half of the respondents had already curbed luxury spending due to price increases that had been taken after the pandemic.

M&A Update

Although we are living in unstable times, industry analysts report that, if a great opportunity comes along, investors will find a way to seize the moment. The caveat though is that the current situation makes it challenging to properly assess a brands’ value and future potential.

Experts feel the kinds of companies that will be most attractive are those who already have longevity, who are solid with a proven track record of profitability, strong margins and a loyal consumer following. They also cite the opportunity for “distressed sales” of floundering companies who have untapped potential.

One thing is certain: the conglomerates will still seek brands that fill any gaps in their existing portfolios. In this day and age, it will still be faster and easier to buy a brand rather than create one.

Indeed, what happened in the past few months? L’oreal became a minority shareholder in Amouage and they made a strategic investment in Korean brand BORNTOSTANDOUT.

Closing Observations

As we near the midpoint of 2025, it’s clear that the fragrance and luxury retail sectors are undergoing seismic shifts. From the collapse of North America’s historic department stores to the rise of experiential retail and niche authenticity, the rules are being rewritten. Brands that understand how to connect meaningfully with a new generation—while weathering economic uncertainty and geopolitical volatility—will not only survive but thrive. Success in this climate isn’t about chasing fleeting trends—it’s about forging lasting value, building trust, and staying agile in a world that refuses to stay still. For brands willing to innovate while staying true to their identity, the opportunities have never been more profound.

SOURCES

Why retail’s e-commerce disruption era is over | Retail Dive

US department store Saks to launch Amazon UK storefront - Retail Gazette

Fine Fragrance Brand Amouage’s Sales Lift 48% | BoF

Fragrance Sales Soften Amid Market Challenges and Consumer Shifts

Trends: the world’s high-end perfume market is booming - Premium Beauty News

Most consumers will pay 25% more for their favorite brands | Retail Dive

The Tariff-Proof International Expansion Playbook | BoF

'A moment of pause': M&A is in limbo thanks to tariff uncertainty - Modern Retail