Following field visits to Shenzhen, Foshan, Hangzhou, Shanghai, and Chengdu from September 14 to 18, CLSA released a research report observing that China's consumption is showing a K-shaped divergence. This pattern supports the firm's view on the rise of premium domestic lifestyle brands, though headwinds persist from cautious consumer sentiment, demographic shifts, employment concerns, and adverse weather conditions.
CLSA's top picks are ANTA Sports (02020) and JNBY (03306), both rated "Outperform." The firm maintains that China's premium lifestyle brands still have room to grow despite macro headwinds, with brands that offer quality products, immersive consumer experiences, and a sustained narrative of unique cultural value capable of maintaining their pricing power.
K-Shaped Consumption and Selective Upgrading
The report notes that overall discretionary demand remains under pressure, but bright spots exist. Macro wealth effects have been gradually improving since 2025, supported by a recovering property market and equity markets, while household leverage has been declining since the same year. However, discretionary consumption has continued to face headwinds from rising input costs, deleveraging, and a defensive savings mentality.
China's affluent population has remained broadly stable. According to Hurun data, the number of wealthy households in Greater China and mainland China with net assets exceeding RMB 6 million has stayed above 5 million and 4 million households, respectively, from 2020 to 2025. Despite a prevailing trend of trading down, consumers are selectively trading up when they perceive clear benefits. Outdoor categories have outperformed over the past few years, and premium beauty and personal care have shown recovery since 2025. A K-shaped consumption pattern has taken shape, meaning one-size-fits-all strategies are no longer effective, and even sectors like sportswear are experiencing de-concentration.
Loyalty and Pricing Power as the Ultimate Test
CLSA believes leading premium brands demonstrate strong customer loyalty and a highly concentrated high-spending base. For instance, approximately 60% of JNBY's offline retail sales come from its top 3% of customers. Fila is estimated to derive 20% to 30% of its sales from its top 1% of customers, while MAO GEPING (01318) and select CHOW TAI FOOK (01929) flagship stores generate about 80% of offline retail sales from their top 10% of customers.
Pricing architecture is the ultimate test for brands. Fila standard offline stores, Shanxia Yousong, and MAO GEPING all maintain strict discount discipline. Inbound consumption could serve as a growth engine. Investors favor management teams that can clearly communicate three-to-five-year blueprints and six-to-twelve-month action plans, possess distinct brand identity and hero products, enforce rigorous inventory and price controls, and demonstrate healthy cash flow and shareholder returns.