© Reuters. The logo of the luxury goods company Richemont is pictured at its headquarters in Bellevue near Geneva, Switzerland, June 2, 2022. REUTERS/Denis Balibouse/File Photo
By John Revill
ZURICH (Reuters) – Cartier owner Richemont enjoyed a surge in sales in China in its latest quarter, signalling on Thursday the resilience of the high end of the luxury market and sending shares of the Swiss watch and jewellery maker sharply higher.
China’s cooling economy and ongoing property crisis have been a worry for the sector which has relied on the country for growth in recent years and had hoped for a strong rebound from strict COVID lockdowns there.
Britain’s Burberry (BRBY.L) posted lower than expected sales growth in China in its final quarter of the year and blamed a worsening slowdown in demand for luxury goods when it issued a profit warning last week.
But for Richemont, one of the world’s biggest luxury groups after France’s LVMH, China’s improvement helped push it towards its highest ever quarterly sales in the three months to the end of December.
Its shares surged nearly 10% in early trading in Zurich.
Richemont said its sales in China, including Macau and Hong Kong, were 25% higher, with Chinese tourists preferring to travel in the region rather than heading further afield.
“There are macroeconomic problems…but mainland China was double digit positive,” Chief Financial Officer Burkhart Grund told analysts.
“Overall, I’d say the Chinese business is rebuilding,” he said, although the process could take years instead of months and quarters for the luxury industry.
Richemont, which also owns Swiss watchmakers Jaeger-LeCoultre, IWC and Piaget, said the power of recognised brands also helped the company. Its Cartier business is the world’s biggest jewellery label.
“In times of, let’s say, economic uncertainty…it helps to be a highly recognised and highly respected jewellery brand through the power of iconic product lines,” Grund said.
“This reassures customers not just in jewellery, but also in watches.”
Jewellery was the star performer for Richemont, with sales up 12% during the third quarter, outpacing watches, where sales rose 3%.
Overall, Richemont said its sales rose to 5.59 billion euros ($6.09 billion) in the quarter, ahead of market expectations.
With currency effects removed, Richemont’s sales increased by 8% in three months Dec. 31, better than the 5% rise in the previous three months but lower than the 19% rise in the April to June period.
Kepler Cheuvreux analyst Jon Cox described the results as a “solid print”, also highlighting strength in the Americas, where sales rose 8%.
“Are we out of the woods for luxury? Not by a long shot, and the first half of 2024 is likely to be tricky,” he said.
“However, I would be loathe to bet against the sector given its GDP multiplier characteristics, strong barriers to entry and where ‘Made in Europe’ is actually a strength and competitive advantage.”
