Stop treating the Luxury Sector as a "Buy the Dip" opportunity.

I went through the latest sector analysis on the luxury industry and came to a conclusion that's pretty sobering. The top-tier companies are excellent, but the broad sector "endless growth" narrative everyone talks about is dead, at best. My base case is a K-shaped recovery for the sector versus the market's expectation of a unified bounce back, which implies major headwinds for the average brand and a structural shift in consumer demand. In this framework, it would be a mistake to treat the luxury sector as a homogeneous buy-the-dip opportunity. The macro view is not aggressive in my opinion, but it's not pessimistic either. I assume a normalization from the pandemic "revenge spending" (where brands grew 20-30% annually) back to the pre-2020 trend lines of roughly 4% to 6% organic growth. The dynamics have shifted drastically: the Chinese growth engine is faltering due to real estate pressure and youth unemployment, while the Western "aspirational buyer" is being severely squeezed by inflation, higher interest rates, and shrinking disposable income. Under these conditions, the market is fragmenting into a clear three-way split: Ultra-Luxury (Hermès, Ferrari), Mega-Conglomerates (LVMH), and the broad Middle Segment. The core issue imo is that a massive chunk of the luxury sector is addicted to the "aspirational buyer" who simply cannot afford to play the game anymore. The business quality at the absolute top is undeniable, but near-term economics for the rest are being pressured by bloated inventories, unrealistic growth targets, and a shift towards "quiet luxury". So my conclusion is that luxury is no longer a rising tide lifting all boats. I can justify owning the absolute top end like Hermès and Ferrari, or a diversified giant like LVMH given their financial flexibility, scale, and pricing power. I have a much harder time justifying buying into the broad middle segment right now, or tagging those turnaround stories as convincingly "undervalued". For those interested, I’ve put a link with the full sector analysis for free. I am curious how you guys here would approach this luxury sector divide, and what your thoughts on the future of the middle-segment brands are!