Guosen: In 2026, the consumer sector may see some market flexibility, maintaining a "outperforming the broader market" rating for the sector.

Guosen released a research report stating that it maintains a "better than market" rating for the commercial and retail sector. The market volatility has increased towards the end of the year 25, but looking ahead to next year, from the perspective of market rotation, the consumption sector may see some policy adjustments at the margin and benefit from improved company fundamentals. The impact of external tariffs on the market is gradually diminishing, and leading companies expanding into overseas markets and diversifying into new product categories will continue to catalyze fundamental growth. The current trend of offline retail restructuring is clear, with some leading companies demonstrating initial operational improvements. Guosen's main points are as follows: 2025 Review From January to September 2025, total social retail sales amounted to 3.65877 trillion yuan, an increase of 4.5% year-on-year, with retail sales of consumer goods excluding automobiles increasing by 4.9%. By category, the retail sales of cosmetics in the first three quarters increased by 3.9%, showing relatively stable performance, while the retail sales of gold and jewelry in the first three quarters increased by 11.5% year-on-year driven by last year's low base and the continuous rise in gold prices. In terms of overseas markets, China's cross-border e-commerce import and export volume in the first three quarters was approximately 2.06 trillion yuan, up by 6.4%, remaining robust despite external factors such as tariffs. Overall, in 2025, there were certain structural highlights in consumption, particularly in areas like pets, toys, personal care, and jewelry, where companies that understand the demands of new consumer groups and innovate their products accordingly performed well. Looking back at the market, capturing the trends of new consumption industries and reversing expectations for traditional consumption were the two core themes. The sector showed positive performance at the beginning of the year, but later cooled off as fundamentals were played out, leading to a decrease in market activity and a narrowing of targets. 2026 Outlook 1) New Markets: On one hand, exploring marginal growth opportunities in the domestic market, including the return of customers through the offline channel restructuring process and new dividends under innovative business models such as instant retail; on the other hand, continuing to explore opportunities in overseas markets, which remains an important way for Chinese brands to tap into incremental markets. 2) New Demands: Based on insights into the preferences of emerging consumer groups in the new market environment, focusing on the emotional and practical value of products, exploring sources of product innovation in the direction of IP+ and AI+, and achieving explosive growth in enterprise sales. 3) Platformization: In the context of intensified competition in existing markets, the lifecycles of individual products and brands are shortening. Therefore, it is necessary to build a platform mechanism and continuously explore new opportunities through internal and external expansion to ensure sustainable and certain growth. Risk Warning: Lower-than-expected end consumer demand, intensified competition affecting profitability of companies, deterioration in operational capabilities due to changes in management, and goodwill increase due to poor post-acquisition management.