Activation Group is a leading Greater China marketing-services provider for pan-fashion brands. It holds a 13.9% market share and serves over 550 brand clients, including Cartier, Chanel, Dior, Louis Vuitton and Prada.

Premium-brand cautious stance weighs on earnings – 1H26 results revealed continued demand pressure. Revenue fell 8.1% YoY to RMB287mn, while net profit declined 28.3% YoY to RMB25.2mn. Mainland China revenue dropped 15% YoY to RMB257mn, and its share of total revenue decreased by about 7ppt to 89.8%. GPM remained relatively resilient at 32.0%, supported by stable pricing in experimental marketing. However, the weaker topline and lower digital margins point to a challenging operating environment.

Lagging effect in customers’ budget recovery – Luxury and high-end consumers remain prudent, while brand owners priorities targeted, high-ROI campaigns over broad-based promotional spending. As marketing budgets typically highly rely on sales forecasts, implying that budget normalization will lag consumption recovery.

Competition intensifies amid client and project changes – Experimental marketing remained the core business, contributing RMB220mn, or 77% of revenue. Digital and communication revenue was broadly flat at RMB65mn, accounting for the remaining. However, its GPM declined 5.2ppts YoY to 33.9%, due to intense competition and changes in client and project mix. This came as a result that brands are not only cautious about marketing spend but also more selective on project scope and pricing.

Our view:

It is expected that the Chinese luxury market will remain challenging for the rest of FY26 and likely extend into FY27.  Meanwhile, the company plans to broaden its coverage into sportswear, beauty and overseas markets to mitigate the segment’s weakness. As per the management, more projects are coming in 2H26, which is typically a peak season. (Amelia Deng)