Richemont Sales Surge Driven by Robust US Demand for Cartier
(Bloomberg) — Richemont sales expanded nearly twice as much as expected in the three months through June, supported by robust demand among wealthy Americans for its Cartier rings and bracelets.
Sales rose by 20% at constant exchange rates, the Swiss luxury group said Wednesday, almost double the Bloomberg consensus forecast for growth of 11%. The shares jumped as much as 7.4% to a record in Zurich, the biggest intraday gain since early May and propelling luxury peers higher.
The positive report is further evidence that Geneva-based Richemont has coped better with the broader slowdown in the luxury sector than rivals like LVMH Moet Hennessy Louis Vuitton SE, Gucci-owner Kering SA and Hermes International SCA, helped by the enduring appeal of brands including Cartier and Van Cleef & Arpels.
The jewelry division, which accounts for about three-quarters of its business, posted quarterly growth of 24%, with sales in the Americas leading the way. In Europe, expansion was driven by strong demand from local customers, as well as among tourists from North America and Middle East. Sales at the specialist watchmakers unit expanded by 8%, with Vacheron Constantin, Jaeger-LeCoultre and A. Lange & Söhne standout performers.
Overall sales advanced across all regions, including a return to growth in the Middle East and Africa, where Richemont gets just under a 10th of its revenue.
Vontobel analyst Jean-Philippe Bertschy attributed the strong results to “years of consistent execution, disciplined price increases, efficient capital allocation, and a portfolio of highly desirable brands with strong pricing power and geographical diversification.”
He highlighted the acceleration of sales growth from “an already elevated base, amid a challenging macro backdrop and relative to peers expected to post weaker results.”
In times of economic uncertainty, high-end jewelry is seen as a superior store of value than expensive apparel and leather goods. Richemont has also noted that Americans tend to be more comfortable splurging on jewelry than Europeans, which helps underpin luxury spending in the US market.
The sector has recently been struggling with a collapse in demand from China, as well as higher gold prices and fallout from the conflict in the Middle East, which disrupted travel in the region and hurt sales at duty-free shopping hubs like Dubai.
Richemont flagged modestly lower quarterly sales in the United Arab Emirates, where Dubai is located. Sales jumped by more than a fifth in Asia-Pacific, driven by the jewelry unit’s strength. Performance there was “largely stable” in the specialist watchmaker business, with a decline in China, Hong Kong and Macau mostly offset by growth in the rest of the region, it added.
The company’s net cash position increased to €9.1 billion ($10.4 billion), including a €400 million windfall from its recent disposal of its stake in duty-free operator Avolta.
–With assistance from Levin Stamm, Anthony Palazzo and Angelina Rascouet.
(Updates shares in second paragraph.)
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