What: Chinese luxury brands are gaining sales and market share while spending in China keeps falling, raising the risk that European groups will not recover their share when the market rebounds.

Why it is important: Investors value Laopu at about 6 times forward earnings, a fraction of European valuations, despite 61% first-half sales growth and gross margins above 40%, which shows how unsettled the market's view of Chinese luxury remains.

Spending in China's luxury market keeps falling, yet some Chinese luxury brands are growing at extraordinary rates. Kering's stock slid more than 10% on Friday after the Gucci owner reported that Asia-Pacific retail revenue fell 8% in the third quarter, year on year. LVMH's sales in Asia excluding Japan fell 5% excluding currency impacts, and Hermès grew less than expected and called China "very difficult." Bain estimates that mainland China's personal luxury market contracted around 19% in 2024 and as much as 5% last year.

Meanwhile, local handbag companies tracked by Bernstein have increased sales by about 51% annually on the country's leading ecommerce platform since 2021. Laopu Gold, dubbed the Hermès of Gold, more than tripled its sales last year, rose another 61% in the first half of this year and has held its gross margin above 40%. It still trades at about 6 times forward earnings, and investors doubt whether homegrown appeal is durable or whether it could translate into global relevance.

The article warns that carmakers BMW and Volkswagen offer a lesson for luxury groups, with Volvo's shares falling as much as 30% on collapsing Chinese sales.

IADS Notes: Chinese luxury brands such as Laopu Gold, Mao Geping, Songmont and ICICLE grew through higher prices, scarcity, vertical integration and digital distribution that bypasses travel retail, even after two consecutive years of contraction in China's personal luxury market (Luxury Tribune, May 2026). Western retailers were adjusting in parallel, with Galeries Lafayette closing its Beijing flagship and moving toward smaller formats, digital engagement and localised curation as domestic brands gained ground (Jing Daily, May 2026). Pressure on European groups has since intensified. China's 20% levy on offshore-trust back taxes weighed on ultra-wealthy spending, a group that had proved more resilient than middle-class consumers, while growth concentrated in fewer brands and categories (Reuters, October 2026). LVMH's fashion and leather goods division fell 5% organically in the third quarter as demand from Chinese clients dropped by a midteens percentage, ending the brief return to growth of the second quarter (WWD, October 2026). Kering's second quarter, its first comparable sales increase in three years, came with a dedicated China plan for more selective, experience-driven consumers (WWD, July 2026).

China's luxury brands are ready to elbow western rivals aside