Kering 2Q26 decline in Asia ex-Japan narrowed, Mainland China remains weak but structural opportunities in premium consumption persist

Overview

This report uses Kering's 2Q26 and 1H26 results as an entry point for a cross-company observation of China's premium consumption and luxury goods market. Kering's 1H26 revenue fell 3% y-y to EUR7.2bn, but rose 1% y-y on a comparable basis; 1H26 operating profit was flat at EUR921mn, with an operating margin of 12.8%, above Bloomberg consensus of 12.3%. 2Q26 revenue was EUR3.65bn, up 2% y-y on a comparable basis, also above consensus of EUR3.62bn.

Core views

The core view is that global luxury demand is showing regional divergence: North America and Japan improved clearly, the decline in Asia ex-Japan narrowed, but the Mainland China market remains challenging. Gucci's sales decline narrowed, consistent with Nomura's June channel checks that observed 'the decline in May narrowed versus April but the trend remained downward.' The report believes Chinese luxury consumption still has structural growth potential and favors China Resources Land and Laopu Gold.

Analysis framework

The report adopts a read-across approach from earnings: it first breaks down Kering group and Gucci brand performance in 2Q26 by revenue, region, and channel, then combines management commentary on the China market with Nomura channel checks to infer the investment implications for Chinese premium consumption, shopping centers, and gold jewelry-related companies.

Methodology notes

• read_acrossRead-across from earnings

  Infer China luxury consumption trends from Kering's 2Q26 regional and brand performance

  The report does not rate Kering as the target company; instead, it uses its 2Q26 results, Gucci's performance, and management comments to observe marginal changes in China's premium consumption demand and map them to China Resources Land and Laopu Gold.

• Valuation methodsNAV discount valuation

  China Resources Land target price is based on 2026F NAV with a discount

  China Resources Land's target price of HKD32.60 is based on 2026F NAV per share of HKD46.50 with a 30% target NAV discount; the benchmark index is the Hang Seng Index.

• Valuation methodsP/E multiple valuation

  Laopu Gold target price is based on FY26F P/E

  Laopu Gold's target price of HKD905 is based on 20x FY26F P/E, broadly in line with its average F12M P/E of 20.3x since its listing in June 2024; the benchmark index is the Hang Seng Index.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China Resources Land (1109 HK)

  Beneficiary linked to premium shopping malls and China luxury consumption trends

  Strengths

  Owns shopping mall assets and premium retail consumption venues; if China's luxury demand improves, tenant sales and mall performance may benefit.

  Weaknesses

  The target price is based on an NAV discount, and valuation is affected by the commercial real estate cycle, rents, and macro demand.

  Comparison

  Compared with brand owners, China Resources Land is more exposed to consumption venues and commercial real estate platforms, benefiting indirectly but across multiple brands.

  Risks

  Sustained macro weakness in China could create uncertainty for shopping mall performance; domestic luxury demand may weaken.

• Laopu Gold (6181 HK)

  Preferred name linked to domestic premium gold jewelry consumption

  Strengths

  Benefits from Chinese consumers' preference for localization, experience-driven consumption, and demand for premium gold jewelry; Nomura assigns a Buy rating and HKD905 target price.

  Weaknesses

  Valuation is based on 20x FY26F P/E and is sensitive to earnings delivery and the sustainability of brand momentum.

  Comparison

  Compared with international luxury brands, Laopu Gold is more closely aligned with Chinese local aesthetics and demand for gold products.

  Risks

  A significant decline in gold prices; fashion risk higher than expected; macro environment weaker than expected.

• Kering (KER PA)

  A read-across company used to observe global luxury and China market trends

  Strengths

  2Q26 revenue returned to growth, Gucci's decline narrowed, and North America and Japan were strong.

  Weaknesses

  Mainland China remains challenging, and Gucci is still in y-y decline.

  Comparison

  As an international luxury group, its regional and brand performance provides an external reference for judging China's premium consumption.

  Risks

  China demand recovery slower than expected; uneven regional recovery; weaker-than-expected brand transformation execution.

Key data

• Kering 1H26 revenueEUR7.2bnDown 3% y-y, up 1% y-y on a comparable basis.
• Kering 1H26 operating margin12.8%Up 0.4ppt y-y, above Bloomberg consensus of 12.3%.
• Kering 2Q26 revenueEUR3.65bnUp 2% y-y on a comparable basis, above Bloomberg consensus of EUR3.62bn.
• Gucci 2Q26 revenue change-2% y-y comparableA clear improvement from the 8% y-y comparable decline in 1Q26.
• 2Q26 regional retail revenue growthNorth America +10%, Japan +9%, Asia ex-Japan -1%, Western Europe -1%Versus +9%, -3%, -4%, and -7% in 1Q26, respectively.
• 2Q26 directly operated retail revenue+2% y-yIncluding e-commerce, improving from a 2% y-y decline in 1Q26.
• 2Q26 wholesale channel revenue+3% y-yGrowth slowed from +6% in 1Q26.
• 2Q26 segment revenueFashion & Leather Goods EUR2.95bn; Jewelry EUR252mn; Eyewear EUR476mnComparable changes were flat, +18%, and +8%, respectively.
• China Resources Land rating and target priceBuy; HKD32.60Current price HKD34.10, price date 29-Jul-2026.
• Laopu Gold rating and target priceBuy; HKD905Current price HKD287.60, price date 29-Jul-2026.

Impact & implications

The investment implication is that China's luxury demand remains dragged by macro conditions and consumer sentiment in the short term, but structural opportunities in premium consumption have not disappeared. Kering management emphasized that consumers are more focused on experience, more selective, and more inclined toward local preferences, which benefits companies with high-quality offline consumption scenarios, strong brand positioning, or the ability to express local culture. Shopping mall operators may benefit from marginal improvement in the luxury retail recovery, while gold jewelry brands may continue to benefit from localized aesthetics, gifting demand, and demand for value preservation.

Risks

• Sustained macro weakness in China weighs on shopping mall traffic, tenant sales, and luxury demand.
• Domestic luxury demand weakens further, affecting premium retail and related commercial real estate performance.
• A significant drop in gold prices undermines gold jewelry consumption and Laopu Gold earnings expectations.
• Laopu Gold faces higher-than-expected fashion risk or declining brand heat.
• Recovery of Kering or Gucci in the China market is slower than expected, weakening the read-across significance for marginal industry improvement.

What to watch

• Whether Gucci's monthly sales decline in Mainland China continues to narrow.
• Whether divergence within Kering's Asia ex-Japan region between Mainland China and other markets such as South Korea widens or converges.
• Traffic at China's premium shopping malls, tenant sales, and luxury brands' willingness to open stores.
• Whether Chinese consumers continue shifting toward experience-driven, local-preference, and highly selective consumption.
• Gold price trends and their impact on gold jewelry demand and Laopu Gold margins.