China’s uncertain economic outlook has led to a reluctance among middle-class consumers to spend money, impacting high-end brands like Maotai from Guizhou the most. Even the peak sales season during the Dragon Boat Festival holiday could not salvage the situation.
According to a report by Bloomberg on June 15, shares of high-end liquor manufacturer Maotai, luxury car dealer Zhongsheng Group, and Nike distributor Topsports International Holdings Ltd. have all dropped by around 10% or more this year. Analysts attribute the poor stock performance to the trend of consumer downgrading in China, with subdued consumption during the Dragon Boat Festival period and early signs of weak consumption during the 618 shopping festival also indicating this trend.
The report also quoted Shen Meng, director of Beijing investment bank Chanson & Co., as saying that there is a significant sense of caution due to the uncertainty in the economic situation. Despite the increase in production capacity by Chinese high-end brands, the demand is weakening, which is likely to harm profit margins and put pressure on stock prices.
During this year’s Dragon Boat Festival holiday on June 10, Maotai’s stock price saw a decline instead of a rise. On June 11, most A-share liquor sector stocks experienced a drop. By the closing bell, Luzhou Laojiao fell by over 4%, while Gufeng Gongjiu, Shanxi Fenjiu, and Wuliangye also dropped by over 2%.
By the closing of June 11, Maotai’s stock price tumbled by 3.1%, reporting 1569 yuan per share, with a total market value of 1.97 trillion yuan. The market value evaporated by over 63 billion yuan in a single day.
Bloomberg stated that Maotai’s stock price has cumulatively fallen by 9.9% since the beginning of this year, making it one of the worst-performing companies on the Hang Seng Index along with Budweiser Brewing Co APAC and Zhongsheng Group, which sell high-end beer and automobiles in China.
Analysts from Jefferies Financial Group Inc. mentioned that despite retailers launching early 618 sales promotions, sales of clothing and appliances in May still slowed down.
The report also cited Xiang Xiaotian, director of Shanghai Chengzhou Investment Management Company, who stated, “The downward trend of high-end brands has not yet bottomed out. We will only see some improvement once the economy and real estate market stabilize in 2025.”
The real estate industry plays a significant role in the Chinese economy, accounting for approximately 60% to 70% of household wealth. However, in recent years, the real estate sector has been in crisis, exacerbating China’s economic difficulties. On May 17, the State Council of the Communist Party of China held a meeting on real estate work, introducing measures like significantly reducing down payment ratios, lowering provident fund loan rates, and lifting commercial loan rate restrictions to stimulate the real estate industry. Despite briefly surging to high levels, real estate stocks, overall, have been on a downward trend amid doubts about this broad relief plan.
In a report on June 14, Bloomberg mentioned that Richemont’s luxury online shopping platform Yoox Net-A-Porter (YNAP) will be exiting the Chinese market due to weak consumer spending, which has increasingly pressured the operation of high-end brands in China.
According to sources cited in the report, Feng Mao Trading Company, a joint venture between YNAP and Alibaba Group Holding Limited, is currently in liquidation.
A spokesperson for Richemont stated in an email declaration that the online retail platform YNAP, under Richemont, plans to concentrate its investments and resources on its core and more profitable regions.