CITIC Securities: Global luxury goods industry under pressure again in Q1 2025.

Guosen Securities released a research report pointing out that after experiencing a glimmer of recovery at the end of 2024, the global luxury goods industry faced pressure again in Q1 2025. Based on statistics from Guosen Securities, the industry's average growth rate remained flat year-on-year, while performance continued to differentiate between brands and categories. Against the backdrop of increasingly rational consumers who value "quality for price," significant price increases and creative improvements in the industry do not align, combined with current macroeconomic uncertainties, Guosen Securities believes that industry pressures will continue in the short term. Looking at brands, top brands such as Hermes and Cartier's jewelry department performed well, while Prada and Coach maintained their momentum. Brands under Kering Group, such as Gucci, and brands under LVMH, such as Dior, are undergoing reforms in terms of products and channels, facing relatively significant pressures. In terms of regions, the overall Chinese market stabilized in Q1; the Japanese market faced significant base pressure, while luxury travel consumption moved towards normalization in the context of shrinking price differentials; the North American market cooled to a certain extent after the holiday season in Q4 2024. In terms of categories, leather goods showed differentiation, jewelry showed resilience, and the data for watches improved against a low base. Looking ahead, Guosen Securities believes that in the short term, the North American market may continue to cool due to financial market volatility and tariff impacts, while the base pressure in the Japanese market may further increase. Guosen Securities believes that the core driving force of luxury goods consumption in China comes from the wealth effect, and according to the sequence of repairing residents' asset-liability balance sheets, the recovery of high-end consumption is expected to lead. Assuming no incremental negative factors, Guosen Securities predicts that the mainland Chinese luxury consumption market may experience a moderate recovery. Overall, Guosen Securities expects the industry's profit margin to remain under pressure in the first half of 2025, with the lack of clear catalysts for valuation repairs in the sector, maintaining a cautious attitude towards the global luxury goods industry and related assets in the short term.