CITIC Securities: Weak recovery continues, luxury goods category performs outstandingly

According to a research report by CITIC Securities, the overall operational performance of the European luxury goods sector improved sequentially in Q2 2026, but the sentiment and valuation center of the sector continue to be under pressure due to external macroeconomic disturbances. By category, the jewelry segment, which offers a high perceived value, maintained the strongest growth performance in the industry, with Richemont's jewelry business revenue growing by 24% year-on-year at fixed exchange rates. The leather goods and ready-to-wear segments have stabilized marginally, but there are significant variations in brand performance. By region, demand improvements were driven by the United States, Japan, and South Korea, while the Chinese market continued weak recovery, and tourism consumption in Europe showed divergence. We believe the overall pressure on the industry remains, and we maintain our previous viewpoint on the sector: despite the ongoing weak recovery, we believe the industry is still shrouded in uncertainty: 1) A new creative cycle has begun, but we think the sector remains a battle for existing market shares, with the revival of certain brands likely coming at the expense of others; 2) The release of purchasing power among entry-level consumers still faces uncertainties; 3) The timeline for a full recovery of the Chinese market is also unclear. We assess that the valuation premium of the luxury goods sector, which has historically delivered a long-term CAGR of 5-6%, is facing new challenges.