Compagnie Financière Richemont reported sales rose 5 percent during the holiday sales period, with its jewelry and fashion houses offsetting weakness in watches and anemic consumer traffic in mainland China, then gripped by a “massive resurgence of COVID.”
Revenues in the three months ending December 31 totaled 5.4 billion euros. Excluding the impact of Russia, group sales rose 7 percent at constant exchange rates.
The results missed consensus expectations by 5 percent, according to equity analysts at Bernstein and RBC.
The trading update, the first in 2023 by Europe’s big three luxury conglomerates, pointed to reduced luxury demand due to high prices and amid disruptions in China late last year.
In contrast, Richemont’s third-quarter revenue rose 43 percent in Japan, 19 percent in Europe and 10 percent in the Middle East, where the company cited benefits from the World Cup in Qatar along with “sustainable local demand.”
At constant exchange rates, sales in America rose 3 percent, with Richemont attributing this “moderate” growth to “a higher share of overseas purchases given the strong US dollar.”
Europe’s drive reflects “the continued strength of local and tourist demand, particularly from the US and the Middle East…Performances from France, Italy and Switzerland were particularly noteworthy.”
Revenue in the Asia-Pacific region declined 9 percent at constant exchange rates, with growth in South Korea, Australia and Singapore only partially offset by lower sales in mainland China, Hong Kong and Macau.
“The massive increase in COVID cases has adversely affected customer traffic and, due to staff unavailability, has led to reduced opening hours of boutiques or the temporary closure of outlets in mainland China, leading to a 24 percent drop in sales during the period under review. ”, said Richemont.
The group’s main jewelery brands – Cartier, Van Cleef & Arpels and Buccellati – rose 8 per cent in the three-month period, in contrast to a 5 per cent decline for its specialist watchmakers, which include Baume & Mercier, IWC Schaffhausen, Jaeger-LeCoultre, Panerai and Vacheron Constantin.
The company noted that Asia-Pacific typically generates half of Richemont’s watch sales, and the region saw a double-digit decline.
Richemont reported higher sales at most of its fashion and accessories houses, notably Alaïa and Peter Millar, accounting for a 6 percent rise in sales in its “other” business area, which also includes AZ Factory, Chloé, Delvaux, Dunhill, Montblanc, Purdey, Serapian and Watchfinder & Co.
Following last August’s decision to sell a majority stake in the loss-making Yoox Net-a-porter group to Farfetch and Alabbar, YNAP’s results were presented on Tuesday as discontinued operations. In the third quarter, YNAP sales decreased by 6 percent.
Richemont noted that its net cash position at the end of the year was €5.5 billion. On May 12, the group is due to announce full results for its financial year ending March 31.
LVMH Moët Hennessy Louis Vuitton is due to announce results for the fourth quarter and full year on January 26, and Kering on February 15.