NEW YORK, United States — Chinese consumers may not be splurging as much on non-essential goods, which doesn't bode well for luxury companies, according to Sanford C. Bernstein.

“More muted” demand from affluent Chinese customers may lower the growth prospects of luxury companies in the absence of further political monetary policy intervention and lack of progress in U.S.-China trade talks, Luca Solca, analyst at Bernstein, wrote in a note summing up the broker’s takeaways from a 2-week trip to China. Leading and concurrent indicators are pointing to weakening discretionary spending there, which means the luxury-goods sector may be close to a “temporary plateau,” he said.

Chinese millennials splashing out on pricey designer clothes and bags, jewellery and watches have been a crucial engine of growth for companies from LVMH and Kering to Moncler SpA and Richemont during the luxury boom of the past few years. Signals of a China spending slowdown are likely to weigh on stocks that have enjoyed a strong run.

The recent field trip “points to a moderating luxury spending environment” for next year, Solca wrote. The negative impact from protests in Hong Kong is also likely to linger well into the first half of 2020, Solca added.

A "polarisation" among the top- and worst-performing luxury brands will probably continue, according to the analyst. He sees labels such as LVMH's Louis Vuitton and Christian Dior, Kering's Gucci, Chanel and Hermes International maintaining "the upper ground."

LVMH, which climbed to a record this week, is among the top performers on Europe's Stoxx 600 Personal & Household Goods Index this year with a 56% increase. Moncler shares are up 30% in the period. By contrast, German apparel maker Hugo Boss AG and Switzerland's Swatch Group AG are down 27% and 3.2% respectively this year.

By Albertina Torsoli; Editors: Beth Mellor, Namitha Jagadeesh, Marion Dakers