China's Luxury Spending Revival Fades Again, Bernstein Warns

Analyst

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Summary · why it matters

China's tentative luxury spending recovery appears to be losing momentum, with early third-quarter data showing a sharp slowdown that raises the risk of another false dawn for the sector, according to Bernstein analysts. Luxury shopping mall sales in mainland China weakened sharply in June and July, culminating in a 12% year-over-year decline in July, following broadly flat growth in the first quarter and low-single-digit growth in the second. The slowdown interrupts a gradual revival over the previous four quarters, as consumer confidence remains depressed and middle-class shoppers are weighed down by weaker economic growth and substantial price increases implemented by luxury brands. New tax measures, including greater scrutiny of offshore wealth and tougher enforcement, are curbing spending among high-net-worth individuals, who had remained resilient. In response, Bernstein cut its third-quarter industry organic growth forecast by 110 basis points to 4.9%, down from 6.3% in the second quarter, and trimmed the full-year 2026 estimate by 40 basis points to 5.1%. Performance is diverging sharply among brands, with Zegna, Gucci, and Richemont's Jewellery Maisons showing relative strength, while LVMH has been weaker. Richemont remains the preferred luxury name, while Gucci's 20% to 30% price cuts could support Kering's near-term performance but risk weakening brand equity over time.