EssilorLuxottica’s Tariff Strategy: Passing the Buck or Building Resilience?

The U.S. tariff landscape has become a recurring storm for global manufacturers, and EssilorLuxottica—the parent company of Ray-Ban, Oakley, and other iconic eyewear brands—is no exception. With nearly half its revenue tied to the U.S. market, the company faces a stark choice: absorb tariff costs, pass them to consumers, or reengineer its supply chain. Recent moves suggest a short-term fix, but the long-term risks remain unresolved.

The Tariff Tightrope

EssilorLuxottica’s exposure to tariffs is staggering. Products sourced from Thailand face duties of up to 36%, while Chinese imports—representing a critical portion of its supply chain—could incur 145% tariffs, and European imports carry a 20% burden. Combined with the U.S. generating 43% of its revenue, the math is clear: tariffs threaten profitability.

To date, the company’s response has been straightforward: raise prices. CEO Francesco Milleri confirmed this strategy, stating, “We’re not immune to tariffs,” but offering no details on supply chain overhauls. This approach prioritizes short-term stability over long-term resilience, relying on consumer willingness to pay more for premium brands like Ray-Ban.

The Risk of Relying on Price Hikes

While price increases may offset immediate costs, they carry hidden dangers. First, demand elasticity could bite. High-end consumers might tolerate modest hikes, but a 145% tariff on Chinese-made goods translates to drastic retail price jumps. Will shoppers continue to buy Ray-Bans at a 30% premium? The answer hinges on brand loyalty and competitors’ moves.

Second, geopolitical risks loom. China’s dominance in manufacturing—particularly for complex components—makes near-term diversification challenging. Even if EssilorLuxottica shifts production to Thailand or Vietnam, it would still face the 36% tariff ceiling. The company’s silence on supply chain redesign raises questions about its preparedness for prolonged trade tensions.

The Unspoken Path to Resilience

The research highlights strategies the company might yet adopt: nearshoring, supplier diversification, or renegotiating “make vs. buy” decisions. For instance, accelerating U.S. or European manufacturing could bypass tariffs entirely, though at higher upfront costs. Alternatively, partnerships with regional suppliers to localize production could dilute tariff impacts.

Industry peers are already moving in these directions. A would reveal whether competitors are outpacing LUX by adopting such measures.

Conclusion: A Fragile Balance

EssilorLuxottica’s current strategy buys time but leaves critical vulnerabilities unaddressed. The 145% tariff on Chinese imports alone underscores the peril of overreliance on a single supply chain. While price hikes may stabilize near-term profits, sustained success demands deeper supply chain reforms.

Investors should monitor two key metrics:
1. U.S. revenue growth: A decline could signal demand fatigue from price hikes.
2. Gross margin trends: A widening gap between LUX and competitors might indicate missed opportunities to mitigate costs.

For now, the company’s brand power and strategic patience may keep investors at bay, but tariffs are a marathon, not a sprint. Without structural changes, EssilorLuxottica risks becoming a victim of its own reliance on a world of rising trade barriers.