Europe’s luxury giants discern green shoots in key China market
Europe’s biggest luxury firms are turning a little more positive on the crucial Chinese market.
Major luxury firms in Europe are expressing a slightly more optimistic outlook on the Chinese market, as the country shows signs of stabilisation in household spending and even a small rebound in some high-end categories. Despite still facing significant challenges, the importance of China to the luxury sector's overall recovery cannot be ignored.
China's economy is grappling with issues such as capital outflows and tax on offshore wealth, which has led to a decline in sales for some of the world's largest luxury brands, including a 10% drop in sales for the 25 biggest labels in China during July. However, earnings estimates are now predicting a gradual improvement in performance throughout the year.
Analysts anticipate that Kering, the owner of Gucci, will return to sales growth in the region, including China, by the fourth quarter of 2026. Hermes International is also expected to experience accelerated growth in the region, while Pandora's declines are anticipated to slow down. Burberry Group reported a 9% increase in retail sales in Greater China during the most recent quarter, driven by demand from Generation Z consumers.
The company attributes this success to targeted local marketing campaigns, including a documentary produced in collaboration with Chinese National Geography magazine. LVMH, the world's largest luxury company, believes that China is stabilising after several quarters of decline, with improving trends in cognac and beauty brand Sephora.
Smaller players like Moncler seem to be well positioned in the market. This positive trend is primarily driven by high-net-worth consumers, reflecting a K-shaped recovery, where only the affluent are benefiting. The uncertain path to recovery is complicated by inflationary pressures tightening discretionary budgets and the ongoing conflict in the Middle East, which is negatively impacting demand in shopping hubs like Dubai and limiting tourist visits to Europe.
Deutsche Bank analyst Do-Hyun Yoo highlights the crucial role that a more substantial improvement in consumer confidence and stronger import flows into China play in determining the industry's future.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
