Published by Global Banking and Finance Review
Posted on April 7, 2025
5 min readLast updated: January 24, 2026
European stocks' promising start to 2025 is reversed by US tariffs, impacting sectors like luxury and sportswear, with significant earnings declines.
By Lucy Raitano
LONDON (Reuters) - European equities' impressive start to 2025 has been obliterated in three sessions of heavy selling, while executives tot up the potential impact of U.S. tariffs on supply chains, possibly forcing them to ditch previous financial predictions.
U.S. President Donald Trump's tariffs are more sweeping than many market players feared, sending global stocks plummeting as investors flee to safe-haven assets amid recession worries.
Companies in Europe's STOXX 600 index, which had its best first-quarter relative to the U.S. S&P 500 in a decade, had been expected to report unbroken quarterly earnings growth through 2025 and into 2026, according to LSEG data.
On Friday, the STOXX 600's year-to-date performance turned negative. And as of 1000 GMT on Monday, it is down 12% since the April 2 close - just before Trump's tariff bombshell.
As of last Tuesday, LSEG estimates already showed a 1.5% drop in STOXX 600 company earnings for the first quarter versus the same period last year.
"The higher than expected tariff rates ... were not factored into many investors' or companies' calculations," said Magesh Kumar Chandrasekaran, equity strategist at Barclays, adding that if this situation persists it should result in lower growth, and ultimately lower revenues and lower profits for companies.
Some sectors are harder hit than others, raising the prospect of profit warnings, several analysts said, but new guidance might be tricky to calculate.
"The question is will there be enough time for them to actually get those numbers in in time? Because we don't know what the retaliation measures are going to be from some of the European partners ... or even from other countries, in that sort of scenario exact numbers might be lacking in some cases," said Chandrasekaran.
On Friday, China announced additional tariffs of 34% on U.S. goods.
AUTOMAKERS, SPORTSWEAR, LUXURY
Pal Skirta, equity research analyst at Bankhaus Metzler, said higher tariffs would erode profit margins for automakers, even if they manage to pass on some costs to customers. This wasn't reflected in 2025 financial forecasts, he said.
In a research note on the luxury and sporting goods sectors, JPMorgan highlighted all the sporting goods companies it covers, as well as Danish jeweller Pandora and French eyewear maker EssilorLuxottica as likely hard hit by tariffs.
"For these companies, our initial, and rough, math would suggest material double-digit negative impacts at EBIT level," it wrote, referring to earnings before interest and tax.
On Thursday, Pandora forecast a potential hit of around 1.2 billion Danish crowns ($178 million) per year from U.S. tariffs. Its shares have plunged about 20% since April 2's close.
EssilorLuxottica shares have slumped 12% since April 2. It didn’t reply to a request for comment.
JPMorgan analysts also highlighted Swiss watchmakers as vulnerable. Switzerland faces a 31% U.S. import tariff - above the 20% for European Union countries.
Bernstein on Monday slashed its 2025 sales forecast for the broader luxury sector to a 2% sales decline from the previously expected 5% growth.
Since last Wednesday's close, Cartier owner Richemont's shares have dropped about 18%, Burberry is down about 20%, Gucci owner Kering is down 19%, and LVMH down 13%.
A spokesperson for Burberry said it could not comment ahead of annual results on May 14. Kering declined to comment. LVMH and Richemont did not respond to requests for comment.
UBS analysts covering Europe's sportswear sector said Trump's 46% tariff on major supplier Vietnam was far worse than expected.
"Vietnam's growing role in footwear manufacturing, and given its substantial contribution to U.S. footwear imports, means the tariffs present a material headwind to sector profitability as the companies may not be able to fully offset them," they wrote.
Shares in Adidas and Puma are down around 18% and 19% respectively since April 2.
An Adidas spokesperson declined to comment on the impact of tariffs, saying it was monitoring the evolving situation.
A spokesperson for Puma said the U.S. accounted for 20-25% of the company's global sales, adding: "We are currently evaluating the situation following the recent announcements and will react swiftly."
Q1 EARNINGS
With the first-quarter reporting season approaching, companies will have to make some assumptions, according to Guy Stear, head of developed markets strategy at the Amundi Investment Institute.
"Companies will ... probably be honest and say look, the world is a very uncertain place, they may do some kind of scenario analysis and they may lay that out for investors," he said.
Share price volatility on earnings days is already sky-high.
Reactions may focus more on how companies are framing the problem and what they're doing to manage uncertainty than individual numbers, said Stear.
"The comments one company makes could have ramifications on others," he said.
Angelo Meda, head of equities and portfolio manager at Banor SIM, said a lot of the bad news may already be priced in for some sectors, which could ward off further big selloffs.
"So let's be prepared for surprises like a stock that reports poorly but then rises," he said.
(Reporting by Lucy Raitano. Additional reporting by Ozan Ergenay in Gdanzk, Danilo Masoni in Milan, Mimosa Spencer in Paris, Helen Reid in London and Elisa Anzolin in Milan. Editing by Amanda Cooper and Mark Potter)
The article discusses the impact of US tariffs on European stocks and sectors like luxury and sportswear.
Luxury brands face significant earnings declines due to US tariffs, with some companies revising their forecasts.
The luxury and sportswear sectors are heavily impacted, with companies like Adidas, Puma, and Pandora experiencing declines.
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