The polarization of the European luxury goods industry has deepened, and the gap between top winners and weak brands continues to widen (Morgan Stanley)

Street Signal | The polarization of the European luxury goods industry has deepened, and the gap between top winners and weak brands continues to widen (Morgan Stanley)

Morgan Stanley found through a survey of channel dealers that the overall sentiment in the European luxury goods industry is polarized. Consumers are becoming more picky, and consumption by high-net-worth customers is increasing, but entry-level customers continue to be under pressure.

Brand momentum is clearly divided, with Brunello Cucinelli and Burberry performing positively, while Balenciaga, Fendi, etc. performing weakly. The industry has yet to see a full recovery. One sentence conclusion: The luxury goods industry is no longer an overall opportunity, but a game of selected stocks.

Companies with top brand power and high-net-worth customer stickiness are the only safe havens. Good/bad: Good for brands such as Brunello Cucinelli and Hermès that focus on ultra-high-end customers; bad for brands such as Gucci that rely more heavily on entry-level customers.

The market may not yet have fully priced in the impact of continued weakness in entry-level consumption, and the premium capabilities of top brands may also be underestimated. Catalysts:

1) Regional and customer group sales growth data in each brand's third-quarter financial report;

2) Chinese and European macroeconomic and consumer confidence indices;

3) Pricing strategy adjustments of major luxury brands.