European Luxury Firms Report Fragile Recovery in China

European luxury firms are experiencing a fragile recovery in the Chinese market as household consumption begins to stabilize, particularly within high-end cosmetics. While sales across the 25 largest luxury labels in China dropped more than 10% in July—a decline attributed to wealth taxes and capital outflow restrictions—several major players are reporting positive trends.

Burberry Group Plc reported a 9% increase in retail sales in Greater China, citing localized marketing and strong demand from Gen Z consumers. LVMH SE noted stabilization in its beauty and cognac sectors, while Kering SA expects to return to sales growth in the region by the fourth quarter of 2026. Other firms, including Pandora and Moncler, are positioned for either a slowdown in sales declines or long-term growth.

Analysts suggest the current boost is driven by high-net-worth individuals in a K-shaped recovery. However, the broader path to acceleration remains uncertain, as a significant increase in general consumer confidence and import flows is required for a full market rebound.