CLSA: China's premium lifestyle brands rise against the trend; top picks are ANTA SPORTS (02020) and JNBY (03306)

CLSA released a research report stating that after visiting five citiesShenzhen, Foshan, Hangzhou, Shanghai, and Chengdufrom September 14 to 18, it observed a K-shaped divergence in Chinese consumption, supporting the firm's view on the rise of premium domestic lifestyle brands, though they also face headwinds such as cautious consumer sentiment, demographics, employment, and even severe weather. The firm's top picks are ANTA SPORTS (02020) and JNBY (03306), both rated "Outperform." The firm maintains that Chinese premium lifestyle brands have opportunities to grow amid macroeconomic headwinds, and brands with premium products, deep consumer experiences, and the ability to consistently convey unique cultural value narratives can sustain their pricing architecture. The firm notes that discretionary consumption demand remains under overall pressure, but there are bright spots: the macroeconomic wealth effect has gradually improved since 2025, with real estate and stock markets recovering and household leverage ratios declining since 2025. However, discretionary consumption demand has still been dragged down this year by rising input costs, deleveraging, and defensive savings sentiment. China's affluent population is broadly stable; according to Hurun data, the number of affluent households in Greater China/mainland China with net assets exceeding RMB 6 million remained above 5 million/4 million respectively from 2020 to 2025. Despite the trend of trading down, consumers will still selectively trade up when they perceive clear benefits. The outdoor category has outperformed in recent years, and premium beauty and personal care have also seen recovery since 2025. A K-shaped consumption pattern has taken shape, one-size-fits-all strategies no longer work, and deconcentration is also occurring in industries such as sportswear. The firm believes that leading premium brands demonstrate strong loyalty and highly concentrated high-spending customer bases. For example, approximately 60% of JNBY's offline retail sales come from the top 3% of customers; Fila estimates that about 20% to 30% of sales come from the top 1% of customers; and approximately 80% of offline retail sales at MAO GEPING (01318) and some CHOW TAI FOOK (01929) flagship stores come from the top 10% of customers. Pricing architecture is the ultimate test for a brand, and Fila standard offline stores, Shanzuoxiaoyousong, and MAO GEPING all maintain strict discount control. Inbound consumption can become a growth engine. Investors prefer management teams that can clearly communicate a three-to-five-year blueprint and six-to-twelve-month short-term action plans, possess distinctive brand identity and hero products, maintain strict inventory and price control, and demonstrate healthy cash flow and shareholder returns.