Forget the China gloom — luxury bosses say shoppers are back
People pass by the Prada store in a modern shopping complex in Chongqing, China, on January 26, 2025.
Cheng Xin | Getty Images News | Getty Images
Chinese customers are returning to luxury. Top executives at Prada, Coach, EssilorLuxottica and Value Retail told CNBC they see demand in China stabilizing after months of weakness, even as the broader luxury industry continues to report softer spending among Chinese consumers at home and abroad.
China was on track to become the world’s largest luxury market during the coronavirus outbreak, but the sector has slowed sharply since then. High youth unemployment, a prolonged housing crisis and weak household confidence have put pressure on discretionary purchases, especially among middle-income consumers.
Speaking to CNBC’s Charlotte Reed at the JPMorgan Global Luxury and Brands Conference in Paris, France, executives said they are starting to see a change in spending patterns. Prada Group’s chief financial officer, Andrea Bonini, said the company was “cautiously optimistic”.
“We’re really seeing things stabilizing,” Bonini told CNBC, adding that “the structural trends in this sector are still there, and they’re still there in China.”
Prada’s CFO said a more “normalized” backdrop could only emerge in 2026 after sharp fluctuations in the wake of the pandemic.
Aries is also seeing strong momentum. “We had a great quarter. Our business in China grew 20%,” CEO and head of brand Todd Khan told CNBC. This trend has been going on for several quarters, he said. He said Coach’s positioning has helped attract a more cautious consumer, adding: “Our sweet spot in China is really resonating, especially if the consumer is more cautious.”
With 25 years in the market, the company is deepening its presence in the field with joint design studios in China and expansion into regional hubs such as Wuhan. Coach is also somewhat insulated from exposure to US tariffs.
“40 percent of our growth is international. So the US tariffs you reference have no impact internationally,” Khan said.
signs of growth
Recent earnings support this view. UBS research showed Burberry’s Greater China sales rose 3% last quarter, beating expectations for flat growth, while Richemont said sales to Chinese customers were “nearly flat”; This is a sharp improvement from previous double-digit declines. UBS added that Richemont delivered 10% APAC growth and saw momentum building towards the end of the year.
LVMH, on the other hand, pointed to early signs of stability. Last month, the luxury giant It reported 1% growth in the third quarter (the first quarterly increase this year), while CFO Cécile Cabanis told analysts that “mainland China turned positive in the third quarter,” according to Reuters.
Still, analysts warn against expecting a full recovery.
Chiara Battistini, JPMorgan’s head of European luxury, told CNBC it was “premature to call this a turnaround and a complete change,” noting that the apparent improvement comes against a “particularly easy” benchmark base. He said some of the rise was due to a repatriation of spending to mainland China rather than a broad-based acceleration.
Battistini said the overall picture of the “total Chinese consumer” in Asia remains “more mixed” as China’s macro environment is still “quite complex”.
Brands are in the race for localization
As competition from Chinese brands intensifies, global brands are being forced to localize much more aggressively. CNBC’s Evelyn Cheng as As reported a few weeks ago, many are increasing China-focused marketing (in some cases to more than 40% of their revenue, according to WPIC’s Jacob Cooke), while also accelerating product cycles and customizing designs using local consumer data.
The rise of social media platforms Xiaohongshu and Douyin has also forced companies to rethink content and product strategy.
The change is slowly trickling down to retailers and large luxury companies, which are seeing moderate growth in the region. Outlet operator Value Retail has seen strong traction. President Scott Malkin said the company’s properties in China are “doing very well right now” and noted that global brands are encouraging the company to expand into China to ensure “the right representation of true excess.”
Malkin said the outlets continue to attract “enthusiastic buyers who will become full-price repeat customers at a different time.”
The same goes for eyewear group EssilorLuxottica, which is reporting broad-based growth. “We achieved double digits in North America, double digits in Europe and double digits in Asia,” said CFO Stefano Grassi.
“We’re seeing consumers not trading. We’re seeing consumers being influenced by product innovation,” Grassi said. Luxury bosses agree that China has stabilized but has not yet recovered.
The recovery continues to move slowly, with brands reshaping strategy and analysts urging caution. Yet, as Prada’s Bonini says, the “structural trends” that power Chinese luxury have not disappeared; they just take longer to reappear.
— CNBC’s Christopher Kang contributed to this report.
