Core Insights - The luxury goods market is experiencing a shift towards discount sales, with consumers increasingly favoring private sales and online platforms for purchasing luxury items at significantly reduced prices [2][4][5] - The trend indicates that younger consumers, particularly Generation Z, are becoming more rational in their luxury spending, moving from a "social necessity" to a "self-indulgent" approach [5] Group 1: Consumer Behavior - Consumers are finding that discount sales can meet their luxury needs, with significant savings observed; for example, a Coach bag originally priced at 4250 yuan was purchased for only 1670 yuan [1][2] - The perception of luxury shopping is changing, with consumers like Song Jie expressing that "wealthy people go to boutiques, while those who understand life go to luxury discount sales" [2] Group 2: Market Trends - The luxury discount market is growing rapidly, with private sales accounting for 18% of the global fashion market value and an even higher percentage in the luxury sector [4] - Forecasts suggest that from 2025 to 2030, the growth rate of off-price sales will be five times that of full-price sales [4] Group 3: Challenges - Despite the attractive discounts, luxury discount sales often have limited availability, requiring consumers to act quickly to secure desired items [4] - The scarcity of discounted luxury items can make them more coveted than those available at full price in boutiques [4]

Core Viewpoint - The fastest depreciating asset in China over the next five years is not cash, but rather real estate, automobiles, luxury goods, and university degrees due to various economic factors and changing consumer behavior [1][3][5]. Group 1: Economic Context - As of June, the broad money supply (M2) in China reached 330.29 trillion yuan, growing by 8.3% year-on-year, indicating severe monetary overexpansion [1]. - The current economic growth rate has significantly slowed, reducing the likelihood of hyperinflation, with the Consumer Price Index (CPI) showing a slight deflation of -0.1% in the first half of 2025 [3]. Group 2: Depreciating Assets - **Real Estate**: Since 2022, housing prices have been in a long-term adjustment phase, with an average decline of 30% from historical highs, and some cities experiencing declines over 60% [5][7]. - **Automobiles**: A price war among domestic and foreign car brands is leading to significant depreciation, with mid-range cars dropping by 20,000 to 30,000 yuan and luxury brands seeing reductions of nearly 100,000 yuan [9]. - **Luxury Goods**: The global luxury goods market has seen a decrease of 50 million consumers, with 65.9% of consumers reducing purchases due to perceived low value for money, leading to price cuts from brands like Gucci and Burberry [11]. - **University Degrees**: The rapid increase in university enrollment has led to a devaluation of degrees, as employers now prioritize experience over academic qualifications, resulting in a surplus of graduates in the job market [13].

Core Viewpoint - Louis Vuitton's chocolate specialty store in Shanghai will cease operations on August 10, 2023, after completing its operational cycle, not due to lease expiration [1][5]. Group 1: Store Closure Details - The chocolate store opened in July 2024 and was the first and only chocolate specialty store for Louis Vuitton in China [1]. - All chocolates were air-freighted from Paris and handcrafted, featuring Louis Vuitton's signature designs, with prices ranging from 240 RMB to 3200 RMB [1]. - The 240 RMB milk chocolate bar was noted as the "cheapest item" from Louis Vuitton [1]. Group 2: LVMH Financial Performance - LVMH reported a revenue of 39.81 billion euros (approximately 333.33 billion RMB) for the first half of 2025, reflecting a 4% year-on-year decline [5]. - The net profit attributable to the group was 5.698 billion euros (approximately 47.708 billion RMB), down 22% year-on-year [5].

Macro Environment - In Q2 2025, global macroeconomic pressures increased, with the IMF lowering global economic growth forecasts in April. Luxury consumption in North America saw a narrowing decline in April-May, followed by an expanded decline in June [1] - Swiss watch exports to the US accelerated in Q2 2025, while exports to China decreased, and Japan and Europe experienced a decline [1] - The strengthening Euro impacted luxury companies' revenue, while the depreciation of the Renminbi against the Euro and Yen may affect overseas consumption [1] Mid-Year Performance - In Q2 2025, luxury companies' revenues generally fell short of expectations, with profit realization showing divergence [1] - Most companies experienced a slowdown or negative growth in revenue, with a majority seeing a decline in net profit margins [1] - By region, the Americas showed acceleration, while tourism consumption in Europe and Japan was affected by high base effects, and Greater China remained under pressure, although some brands showed signs of recovery [1] - By brand, Miu Miu led with a 40% increase, while Canada Goose saw significant acceleration [1] Growth Drivers Assessment - The impact of European tourism is expected to continue into Q3's peak season, while North America faces high base effects in Q4, leading to ongoing uncertainty for the year [1] - Price increases have been implemented by Hermès, Kering, and Prada in H1 2025, with single-digit growth rates. Some brands plan to expand price ranges by increasing accessory products (LVMH) and lowering entry-level product prices (Prada) [1] - Companies continue to invest in expenses, with a high direct sales ratio, indicating that positive operating leverage remains a key driver for margin improvement [1] Industry Trend Outlook - Brands such as Gucci, BV, Dior, and Miu Miu plan to launch significant new products for the autumn-winter season [1] - It is anticipated that luxury consumer segments may further differentiate, with high-net-worth customers showing strong brand loyalty, while aspirational customers may shift their preferences from brand-driven to product and cultural value-driven [1] - In Q2 2025, Miu Miu topped the Lyst rankings again, with the top five brands remaining consistent with Q1, although there were changes in rankings, and Burberry and Birkenstock entered the top 20 [1] Stock Prices and Valuation - Year-to-date in 2025, most luxury companies have underperformed compared to the major stock indices, with Burberry and Tapestry significantly outperforming (by 20 percentage points and 59 percentage points, respectively) [2] - The consensus forecast for luxury companies in 2025 indicates an expected revenue growth rate of approximately 1.8% and a net profit growth rate of -2.3%, suggesting that operational leverage impacts will persist in the short term [2]

Core Viewpoint - Louis Vuitton's only chocolate store in China, located in Shanghai, will cease operations due to the normal expiration of its lease, with the last day of operation set for August 10, 2024 [1] Group 1: Store Operations - The chocolate store opened in July 2024 and was the first and only dedicated chocolate store for Louis Vuitton in China [1] - The location was initially used as a pop-up space for selling shoes and clothing before becoming a chocolate store [1] Group 2: Customer Feedback - Many customers have praised the store for its good service, sense of ceremony, and exquisite packaging [1] - However, customers have noted that the prices are significantly higher compared to other chocolate brands, while the taste does not stand out [1] - One consumer mentioned that the store's location is far from traditional shopping areas, making it less appealing for casual purchases unless for gifting purposes [1]

Core Insights - Louis Vuitton's chocolate store in Shanghai will cease operations on August 10, 2024, due to the normal expiration of its lease, marking the end of its first and only chocolate specialty store in China [1] - Consumer feedback indicates that while the store offered good service and elegant packaging, the high prices and lackluster taste compared to other brands hindered its appeal [1][4] - The trend of luxury brands entering the food and beverage sector began during the pandemic, with brands like Maison Margiela and Ralph Lauren opening coffee shops to enhance customer experience and drive additional sales [3] Industry Trends - The influx of luxury brands into the food and beverage market has led to a saturation of options, making it challenging for new entrants to differentiate themselves [4][8] - Many luxury brands have opened independent cafes or food stores, but the competitive landscape has become crowded, leading to a decline in unique offerings [4][8] - The perception of luxury brand cafes as merely a marketing gimmick rather than a viable business model is growing, as many consumers view them as one-time experiences rather than repeat visits [8] Consumer Behavior - Gift-giving is a primary motivation for consumers purchasing Louis Vuitton chocolates, indicating a disconnect between brand prestige and product familiarity [1] - The location of the chocolate store, away from traditional shopping areas, further limited its customer base, as many consumers would not visit without a specific gifting need [1] - The high price point of luxury food items does not guarantee increased sales in other product categories, as consumers often do not make additional purchases when visiting solely for food [4]

Investment Rating - The report provides a mixed investment rating for the luxury goods sector, with specific companies like LVMH and Hermès showing resilience, while others like Kering and Canada Goose are facing significant challenges [22][30]. Core Insights - The luxury goods market is experiencing a slowdown, with overall retail sales in North America showing fluctuations, particularly in the luxury segment, which saw a decline of up to 14% in certain months [6][22]. - The report highlights a significant disparity in performance among luxury brands, with LVMH and Hermès maintaining positive growth, while Kering and Canada Goose reported substantial declines in revenue [22][30]. - The global economic outlook remains cautious, with the IMF projecting a world GDP growth of 3.2% for 2025, which may impact consumer spending in the luxury sector [4]. Summary by Sections Economic Outlook - The IMF forecasts a global GDP growth of 3.2% for 2025, with developed countries expected to grow at 1.8% and emerging markets at 4.2% [4]. - China is projected to grow at 4.5%, while India is expected to lead with a growth rate of 6.5% [4]. Retail Performance - North American retail sales showed a mixed performance, with overall sales declining by 0.4% in June 2024, while luxury retail sales experienced a more severe drop of 14% [6]. - The luxury segment's performance is expected to remain volatile, with some months showing recovery while others continue to decline [6]. Company Performance - LVMH reported a revenue decline of 7.1% in Q2 2025, while Hermès showed a more stable performance with a decline of only 0.5% [22][30]. - Kering faced a significant revenue drop of 17.9%, indicating challenges in its luxury brand portfolio [30]. - Canada Goose reported a staggering decline of 61.8% in its latest quarter, highlighting severe operational challenges [30]. Market Trends - The report notes a shift in consumer behavior, with a growing preference for brands that offer unique and aspirational products, impacting traditional luxury brands negatively [22]. - The luxury watch segment, particularly Swiss watch exports, saw a decline of 5.6% in June, indicating broader market challenges [10]. Regional Insights - The report emphasizes the importance of the Chinese market for luxury brands, with a notable increase in Chinese tourists traveling to Japan and the U.S., which could influence luxury spending patterns [17]. - The performance of luxury brands varies significantly by region, with some brands performing better in Asia compared to North America and Europe [22].

Core Insights - The luxury goods industry is experiencing a downturn, with major players like LVMH and Kering reporting significant declines in revenue and profits for the second quarter of 2025 [1][4][5] - The overall market sentiment has shifted, leading to a revised forecast for global luxury goods sales, now expected to decline by 2% to 5% in 2025 [1][4] Group 1: Company Performance - LVMH reported a 4% decline in revenue for Q2 2025, with operating profit down 15% and net profit down 22%, particularly affected by poor performance in its core fashion and leather goods segment [1] - Kering's Q2 revenue was €3.7 billion, a 15% year-on-year decline, with Gucci's sales down 26% for the sixth consecutive quarter, and net profit down 46% [1] - In contrast, Prada's Miu Miu saw a 40% increase in Q2 revenue, while Richemont exceeded market expectations with a 6% revenue growth in Q1 2026 [4] Group 2: Market Trends - The Japanese market has shown weak performance, with Kering's Asia-Pacific revenue down 21% and LVMH's revenue in Japan down 15% [5] - The luxury sector is witnessing a "layered" market dynamic, where some brands thrive while others struggle, indicating a divergence in performance across different companies [4] Group 3: Channel Restructuring - Many luxury brands are closing stores, with Kering planning to close 80 stores this fiscal year, focusing on optimizing their retail presence [7][9] - The strategy involves reducing the number of stores in lower-tier cities while concentrating resources in major urban centers to enhance brand visibility and consumer engagement [9][10] Group 4: Marketing Strategies - Luxury brands are adopting a more restrained marketing approach, focusing on quality over quantity, with Valentino and Hermès leading this trend by reducing the frequency of marketing events [11][12] - This shift aims to enhance brand perception and mitigate risks associated with excessive visibility and consumer backlash during economic downturns [12][13] Group 5: Conclusion - The luxury goods industry is undergoing a significant adjustment phase, with leading brands refocusing on core markets and adopting more subtle marketing strategies, moving away from aggressive growth tactics [13][14]

Core Viewpoint - Citigroup's research report indicates that Prada's revenue growth has slowed to single digits (6%) in the latest quarter, with the Prada brand experiencing negative growth for the first time since 2020, while Miu Miu shows better-than-peer performance despite gradual normalization [1] Group 1: Financial Performance - Prada's revenue growth has decreased to 6%, marking a significant slowdown [1] - The Prada brand has recorded negative growth for the first time since 2020 [1] - Miu Miu's performance is improving but still outpaces its competitors [1] Group 2: Investment Needs - The company requires substantial investments in advertising, promotions, production, IT infrastructure, and the expansion of Miu Miu's retail network, which may limit further profit margin expansion [1] Group 3: Financial Forecast Adjustments - Sales, EBIT, and earnings per share forecasts for 2025 have been reduced by 2%, 2%, and 4% respectively, and for 2026 by 3%, 5%, and 6% respectively [1] - The target price has been lowered from HKD 52.3 to HKD 45.5, maintaining a "neutral" rating [1]

Core Viewpoint - Phoebe Philo is making a significant entry into the Chinese market with aggressive retail expansion, targeting independent urban women with high purchasing power, despite the high price points of her products [3][4][5]. Group 1: Brand Expansion and Market Strategy - Phoebe Philo has signed five retail partnerships in China, including luxury stores and new entrants, marking her first venture into the Chinese market [3]. - The brand's pricing strategy positions its products as investments, with handbags averaging 40,000-50,000 RMB and outerwear priced around 200,000 RMB [4]. - Philo's approach to retail includes collaborations with both traditional luxury retailers and emerging platforms, aiming to reach a younger, trend-seeking demographic [12]. Group 2: Design Philosophy and Consumer Connection - Philo is recognized as a pioneer of minimalism in women's fashion, with a loyal following that remains attached to her previous work at Celine [5][6]. - Her designs are characterized by a focus on quality and craftsmanship, with a belief that clothing should be intuitive and practical [6][8]. - The brand's recent collections have sold out quickly, indicating strong demand from her established fan base, despite some criticisms regarding quality and fit [8][14]. Group 3: Challenges and Adaptations - The transition to an independent brand has posed challenges, including sourcing materials and managing inventory risks without the support of a larger luxury group [14]. - Philo is adapting her business model by improving return policies and expanding product ranges to include more accessible price points [14][15]. - The brand's identity is evolving, with some critics noting a shift towards more conventional luxury branding elements, such as logo usage [16].