Why You May Find Fewer Discounts on Luxury Brands This Year

Are you waiting for a sale to splurge on a designer piece? Don’t hold your breath.

Luxury brands like Ralph Lauren (RL), Coach, and Kate Spade are moving away from markdowns, executives said during earnings conference calls this week.

Ralph Lauren is easing up on discounts in response to healthy demand for its merchandise, CFO Justin Picicci told investors on Thursday. Sales were so strong through Black Friday that Ralph Lauren pulled back on planned promotions, ultimately lowering its discount rate by 5 percentage points during the quarter ended Dec. 28, Picicci said. In North America, same-store sales grew 8% compared to the same period last year, while wholesale revenue increased 6%, the company said.

“We saw really strong full-price selling,” Picicci said, according to a transcript of the call made available by AlphaSense. In the current quarter, the retailer plans to “pull back further on end-of-season discounting,” he added.

Tapestry Finds Value in Iteration, Not Discounts

Coach has had success moving away from markdowns. The average price of all handbags sold last quarter grew by double digits compared to the same period last year, according to Todd Kahn, CEO and brand president. Kahn said Coach has avoided a “vicious cycle of markdowns” by focusing in recent years on “fewer, deeper ideas.”

Traditionally, when a product like the Tabby bag lost steam, Coach might put it on sale or send it to outlets, and replace it with a new bag, Kahn explained. Today, he said, the brand iterates on the original design, creating a new product—”Pillow Tabby,” for example—and reinvigorating demand for the original in the process.

Coach parent company, Tapestry (TPR), thinks it can shore up Kate Spade, where revenue declined 10% last quarter, with a similar strategy. The company is aiming to discontinue more than 15% of Kate Spade handbag styles by the fall.

“Innovation is winning with the consumer,” Tapestry CEO Joanne Crevoiserat said on the company’s earnings call last week. “Continuously hitting the consumer over the head with price is not.”

Luxury Spending Revival Could Be Around the Corner

The companies are limiting discounts as luxury appears to be coming back into style. Spending with high-end brands and venues picked up in late 2024 after more than two years of declines, according to an analysis of Bank of America credit and debit card spending. Granted, spending was down year-over-year, but by the smallest amount since 2022.

“Luxury spending has finally started to improve, and there are signs of early green shoots heading into 2025,” BofA analysts recently wrote. “Future shopping sprees could be a short catwalk away.”

Americans, they found, are increasingly splurging abroad. About 13% of luxury spending took place overseas in 2024, up from both 2023 and 2019. That’s buoyed the results of some European luxury companies, like Burberry (BRBY) and Cartier-owner Richemont, both of which finished last year with better-than-expected quarters.