Cartier Owner Richemont’s Sales Beat Expectations in Holiday Quarter

(Bloomberg) — Richemont’s customers splurged on its watches and Cartier jewelry over the holidays particularly in the US, even as wider concerns about the luxury market remain.

Sales on a constant currency basis rose 11% to a record in the fiscal third quarter, the Swiss luxury group said Thursday. That beat the 7.5% estimated by analysts, while 14% growth at the jewelry division also topped expectations.

Shares of Richemont rose at the open in Zurich before slipping as much as 3.4% as investors took profit, noting its high valuation and margin pressures.

Richemont has weathered the downturn in the luxury industry better than most rivals because its pricey rings and bracelets are often viewed as a better store of value than expensive apparel and leather goods.

Its third quarter is typically its strongest due to holiday spending. That is likely to temper optimism, especially after the company said it faced higher raw material costs and warned about currency effects weighing on margins.

Demand also remained subdued in mainland China, likely cooling hopes of a wider rebound. The return to sales growth was mainly driven by Hong Kong, while Citigroup analyst Thomas Chauvet said there was “improved quality of demand in key Chinese cities and among higher-end clients.”

Shares of the world’s largest luxury group LVMH also reversed earlier gains, along with Burberry Group Plc’s stock.

In Richemont’s latest quarter, demand was strong in the Americas, while tourists from the Middle East stoked sales in Europe, the company said. Japan also outperformed with a 17% increase.

All divisions generated growth, including specialist watchmakers with a 7% sales increase — a strong figure given recent weakness in the wider watch market. US tariffs, foreign exchange and rising materials costs had lowered expectations for the unit that includes brands such as Jaeger-LeCoultre and Piaget.

Swift Effect

“Richemont sustained its growth trajectory and reinforced its leadership in the luxury sector,” said Vontobel analyst Jean-Philippe Bertschy. While its margins and free cash flow face ongoing pressure, the luxury giant’s brand portfolio, pricing power and balance-sheet strength stand out, he added.

Cartier is experiencing a strong boost in popularity as celebrities like Taylor Swift and Timothée Chalamet turbo-charge the desirability of its jewelry and diamond-encrusted watches.

“Richemont has set a high bar to kick off this earnings season, with a strong print against elevated expectations and tough comparatives,” RBC analyst Piral Dadhania said in a note.

Earlier this week, Brunello Cucinelli SpA posted a reassuring set of numbers according to analysts, who welcomed a relatively quiet release considering recent volatility in the sector. The Italian brand sells cashmere and vicuña bomber jackets.

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