Live Markets: Don't bet on a Chinese rebound to save luxury

Ermenegildo Zegna NV

28/10/2025 11:05

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DON'T BET ON A CHINESE REBOUND TO SAVE LUXURY

Luxury bulls may be celebrating better-than-expected results this season, but Berenberg urges caution, especially about China.

While organic revenue growth for European luxury averaged 5.3% last quarter, topping consensus by 2.1 pct points, the German bank says optimism around consumers in the world's second-largest economy is misplaced.

"We believe that the luxury supercycle is over," Berenberg analysts say, citing constrained incomes and shifting preferences among Chinese, aspirational and Gen Z buyers.

The Chinese cluster remains weak: LVMH LVMH.PA saw low-single-digit declines, while Kering PRTP.PA posted a high-teens drop.

Despite some signs of stabilisation, management commentary was relatively cautious, they say, with Prada 1913.F and Zegna JN0.F being clear in saying that the growth rates of the past decade won’t return.

"While the worst may indeed be behind us, we believe that a balance sheet recession will constrain Chinese (luxury) consumption for several years to come".

Berenberg expects the next cycle to bring more modest growth of around 2–3% annually, far below the 6–7% long-term average.

Since its sector downgrade earlier this month, Berenberg has spoken with some 50 investors and found surprisingly little pushback around its contrarian stance.

Among long-only investors, 70% agreed and just 10% outright disagreed.

(Danilo Masoni)

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