People walk past the Prada storefront in a modern shopping complex in Chongqing, China, on January 26, 2025.
Chen Xin | Getty Images News | Getty Images
Chinese shoppers are returning to luxury goods. Top executives from Prada, Coach, Essilor Luxottica and Value Retail told CNBC that demand in China is stabilizing after months of weakness, even as the broader luxury goods sector continues to report weaker spending among Chinese consumers at home and abroad.
China was on track to become the world’s largest luxury goods market during the coronavirus pandemic, but the sector has slowed sharply since then. High youth unemployment, a persistent real estate recession and declining household budget confidence are weighing on discretionary purchases, especially among middle-income shoppers.
Executives interviewed by CNBC’s Charlotte Reid at the JPMorgan Global Luxury Brands Conference in Paris, France, said they are starting to see a shift in spending patterns. Prada Group Chief Financial Officer Andrea Bonini said the company was “cautiously optimistic”.
“The situation is certainly stabilizing,” Bonini told CNBC, adding that “the structural trends in the industry are still there, and they’re the same in China.”
Prada’s chief financial officer said it could be 2026 before a more “normal” situation emerges after the sharp upheavals following the pandemic.
The director is also on board. “We had a great quarter. Our China business grew 20%,” CEO and brand president Todd Kahn told CNBC, adding that the trend has continued for several quarters. He said Coach’s positioning is helping it attract more cautious consumers, adding: “Our sweet spot in China really resonates, especially when consumers are more cautious.”
The company has a growing presence in the field, with 25 years in the market, a collaborative design studio in China, and expansion in regional hubs such as Wuhan. Coach is also somewhat insulated from the impact of U.S. tariffs.
“So 40% of our growth is international. So internationally, the U.S. tariffs you mention have no impact,” Khan said.
signs of growth
Recent earnings support that view. Burberry’s sales in Greater China rose 3% last quarter, according to UBS research, beating expectations for flat growth, while Richemont said sales to Chinese customers were “nearly flat”, a significant improvement from previous double-digit declines. UBS added that Richemont achieved 10% growth in the Asia-Pacific region, with momentum improving towards the end of the year.
LVMH notes early signs of stabilization. Last month, the luxury goods giant reported third-quarter growth of 1%, its first quarterly growth of the year, and Chief Financial Officer Cecile Cabanis told analysts that “Mainland China turned positive in the third quarter,” according to Reuters.
Still, analysts caution against assuming a complete rebound.
“It’s too early to call it an upturn, a complete turnaround,” Chiara Battistini, head of European luxury goods at JPMorgan, told CNBC, noting that the apparent improvement was against a “particularly easy” standard of comparison. He said some of the rise reflected spending flowing back to mainland China rather than a broader acceleration.
Battistini said the overall picture of the “overall Chinese consumer” in Asia remains “more complex” and that China’s macro context remains “quite complex.”
Brands compete for localization
Global brands are being forced to localize more aggressively as competition from Chinese brands intensifies. As CNBC’s Evelyn Chen reported a few weeks ago, many companies are increasing their marketing focus on China, accounting for more than 40% of their revenue in some cases, according to WPIC’s Jacob Cook, as well as accelerating product cycles and using local consumer data to adjust designs.
The rise of social media platforms “Xiaohongshu” and “Douyin” is forcing companies to rethink their content and product strategies.
This shift is gradually trickling down to the region’s modestly growing retailers and large luxury goods companies. Outlet operator Value Retail is showing solid traction. Chairman Scott Malkin said the company’s China real estate is “doing very well right now,” noting that global brands are encouraging the company to expand into China to “properly present true profitability.”
Malkin said the outlet continues to attract “aspiring buyers who will become full-price customers again at another moment.”
The same is true for eyewear group EssilorLuxottica, which reports widespread growth. “It was double digits in North America, double digits in Europe and double digits in Asia,” Chief Financial Officer Stefano Grassi said.
“It’s not that consumers are getting a bargain. We see consumers being attracted to product innovation,” Grassi said. Luxury goods executives agree that while China is stabilizing, it is not yet recovered.
The recovery remains at a slow pace as brands refocus their strategies and analysts urge caution. Still, as Prada’s Bonini said, the “structural trends” underpinning China’s luxury goods are not going away, they will just take time to resurface.
—CNBC’s Christopher Kang contributed to this report.
