Ultra-rich shoppers wield perverse economic aegis

Champagne keeps flowing as beer refills slow. Ritzy brands are expressing more confidence and pricing power than Main Street counterparts grappling with tariffs and anxious shoppers. This divergence suggests that the ultra-rich could buttress an economic slump, at least for a while, but also betrays a shaky system.

The tippy top of the opulence pyramid has been insulated from the disquiet so far. Italian sports car manufacturer Ferrari bucked a trend of companies yanking financial guidance and stuck with its 2025 outlook. Hermes CFO Eric du Halgouet said his company would simply charge more for its silk scarves to offset US import duties. Cashmere merchant Brunello Cucinelli expects 10 percent sales growth both this year and next. By contrast, Kering and Moet Hennessy Louis Vuitton, whose closets house more accessible luxury items, were less optimistic.

It’s a reminder that scarcity and craftsmanship help justify ever-higher prices. Ferrari limits production, Hermes customers wait years for Birkin bags and Cucinelli’s artisans command $8,500 for a coat. An index tracking Europe’s biggest luxury stocks has outperformed the S&P 500 Index by about 80 percentage points over the past decade.

This pattern extends beyond fashion and autos. Posh hotels have generated 6 percent more revenue per room this year, while other lodging suffered declines, according to hospitality research outfit STR. At $7 billion Life Time, whose upscale gym memberships start at $200 monthly, the company’s share price is up 85 percent since its initial public offering in October 2021. Over the same span, $8 billion discount chain Planet Fitness gained just 28 percent.

Such examples also reflect a widening divide. The top 10 percent of American earners increased their spending 58 percent in the four years through September 2024, Moody’s Analytics found. Consumption growth from everyone else barely outpaced 21 percent inflation recorded over the period. Elite purchasing power is expanding, too, with the top decile’s net worth up 40 percent, or more than $30 trillion, from 2019 through 2024, US Federal Reserve data shows. More pointedly, UBS research shows that the richest 1.5 percent of the population holds $214 trillion, or about half, of the world’s lucre, while the bottom 40 percent claims just $2.4 trillion.

It’s no wonder mass-market retailers from Target to Macy’s say shoppers are already trading down for cheaper goods. Higher tariffs threaten to accelerate the trend, raising costs for consumers just scraping by. The danger is that economies leaning so heavily on their wealthiest are not only unequal, but also unsustainable.

Upscale fitness chain Life Time said on May 8 that it roughly tripled its first-quarter net profit to $76 million from a year earlier on an 18 percent increase in revenue, thanks to higher average membership fees and more spending at the gyms.

Discount rival Planet Fitness on May 8 reported a 20 percent rise in net income during the first three months of the year, to $42 million, on a 6 percent gain in revenue at clubs open at least a year, crediting its marketing campaign.

[Sebastian Pellejero is a US columnist for Reuters Breakingviews writing about topics in business, investing, markets, and technology, based in New York.]