Richemont Sales Rise on Stronger Demand from US, China
(Bloomberg) — Richemont sales climbed as shoppers from the US to China snapped up the luxury group’s pricey Cartier and Van Cleef & Arpels jewelry.
Sales at the jewelry division, Richemont’s largest, climbed 14% at constant exchange rates in the six months ended September, the Swiss company said Friday. Analysts had expected a gain of 10.3%. Overall, sales climbed 10%, above estimates.
Jewelry remains a “remarkable locomotive for growth” for Richemont, Jefferies analyst James Grzinic said in a note, adding that the results confirm the group as the “fastest growing in luxury.”
Richemont has withstood the downturn better than most of its rivals because of the appeal of its costly rings and bracelets, which in times of economic uncertainty are often viewed as a better store of value than expensive apparel and leather goods.
Recent financial results in the luxury sector have lifted hopes that the broader slump — particularly in China — may be subsiding. LVMH, the owner of brands including Louis Vuitton and Christian Dior, returned to growth last quarter, while Burberry Group Plc saw comparable store sales turn positive for the first time in two years. Both cited signs of improvement from China.
Richemont shares rose as much as 8.7% in Zurich, the biggest intraday gain since April. The stock climbed 17% this year through Thursday’s close, with gains holding up even after the Trump administration in August slapped a 39% tariff on Swiss imports, the highest levy in the developed world.
Chairman Johann Rupert said there are signs the “misunderstanding” over tariffs between the US and Switzerland is being cleared up. “We should hear something on this front today or next week,” he said on a call with media. Rupert was among businessmen who met with US President Donald Trump last week to seek better trade terms for Switzerland.
The hit to its profit margins will be much steeper in the second half of the fiscal year if no improved trade deal is reached, after the first half was shielded by inventories in the US, Chief Financial Officer Burkhart Grund said on a conference call. Richemont estimates the impact of US tariffs will amount to about €300 million ($349 million) during the current fiscal year.
In spite of the strong results, the outlook remains somewhat clouded, according to the chairman. “Looking ahead, it is evident that we will need to continue navigating through uncertain times, given that recovery paths remain unsteady for instance in China, and that external pressures show no sign of abating,” Rupert said in a statement.
“The Chinese clientele is becoming more selective and it may remain so even upon full recovery,” he added on the call.
Richemont is well positioned for that challenge because of its strong brands like Cartier, which Rupert described as a “machine” that has build trust with consumers over decades.
Revenue from the region that includes China rose 5% at constant exchange rates in the first half, better than expectations for an increase of about 1.3%. The Americas and Europe rose 18% and 11%, respectively, during the period.
Results were “above expectations across all divisions,” said Barclays analyst Carole Madjo.
Sales at Richemont’s specialist watchmakers unit, which includes labels such as Jaeger-LeCoultre and Piaget, fell 2% at constant currencies, a smaller decline than expected. Demand in China, Macau and Hong Kong remained soft. Unfavorable currency movements, a higher gold price and US duties are weighing on the division.
–With assistance from Levin Stamm.
(Updates with comment from CFO during conference call)
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