Europe's biggest luxury firms are turning more positive on the crucial Chinese market as a fragile spending recovery takes shape. Chinese household consumption is stabilizing and rebounding in categories like high-end cosmetics, improving sector sentiment. Despite this, the market remains under significant pressure, with sales at the 25 biggest luxury labels dropping over 10% in July as the country stems capital outflows.

Earnings estimates point to a pickup in performance through the year. Kering SA is expected to return to sales growth in the China region by Q4, while Hermes International is anticipated to accelerate growth. Burberry Group reported a 9% sales jump in Greater China driven by Gen Z demand.

LVMH notes China is stabilizing after quarters of deterioration, with improving trends in cognac and beauty. Citi analyst Thomas Chauvet raised his price target on Moncler, citing long-term opportunities in untapped US and China segments. Overall, Richemont benefits from Hong Kong and Macau tourism, Kering shows sequential improvement, LVMH stabilizes, and Hermes remains the most consistent operator.

This recovery is driven by high-net-worth consumers in a K-shaped trend, though broader sentiment remains uncertain amid inflationary pressures and Middle East conflict. Without improved consumer confidence and import flows, reacceleration remains in doubt.