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At a time when China’s economy faces turbulence and the country’s anti-corruption campaign continues at full speed, some luxury brands are faring much better than others in maintaining their appeal with Chinese shoppers.
According to a recent Exane BNP Paribas study of China’s luxury market released in time for Chinese New Year called “The Year of Monkey Business,” capital outflow is likely to continue in 2016 as China’s affluent rush to invest in other countries thanks to uncertainty about the stock market and economy. “The economy is getting worse and it will get worse,” it states, predicting that troubling signs such as RMB devaluation, increasing unemployment, and declining consumer sentiment will all have damaging effects on the luxury market in 2016.
In addition, China’s anti-corruption campaign is expected to “continue with the same intensity” as last year in 2016 as “the political situation remains very tense and fragile.” For top-tier luxury brands such as Ferrari, this means that “high-end consumption has found a bottom” in mainland China, but “no growth is expected in the foreseeable future.”
Some luxury companies are faring better than others in this environment, and are more likely to maintain their luster through Chinese New Year and in 2016. Based on recent Q4 results released by brands, the firm finds that comparatively exclusive labels such as Moncler, Givenchy, Fendi, Saint Laurent, and Valentino have managed to stand apart as “winners.” Meanwhile, mega-brand Louis Vuitton, which struggled in China in recent years, seems to be bouncing back with “low-single-digit growth,” while its rival Gucci is still in the process of attempting to stage a comeback. Prada is also still in “negative territory,” while Burberry is “flat.”
The accessible luxury category that has benefited from the growth of the middle class is seeing a divergence in fortunes as well, as Kate Spade, Tory Burch, Michael Kors, and Longchamp are faring well, while Furla and Coach are showing signs of a struggle. The report notes that although China’s middle class didn't take much of a hit from the country’s stock market woes over the past year, continued economic pain may reach it in the year to come.