Solid Jewellery Performance Offsets Weak China Sales
Richemont, the parent company of Cartier, reported a modest increase in sales for the first quarter, bolstered by robust performance from its jewellery brands, despite facing significant challenges in the Chinese market and its luxury watch segment. The company saw a 1% rise in sales at constant currencies, reaching €5.3 billion ($5.8 billion), aligning with analyst expectations but falling short of the double-digit growth recorded in the previous year. Jewellery sales, encompassing brands like Van Cleef & Arpels and Buccellati, increased by 4%.
Shares in Richemont dipped 0.5% in Zurich following the earnings report and have declined 1.3% over the past 12 months. The Swiss conglomerate, which also owns Vacheron Constantin, Jaeger-LeCoultre, and Piaget, is grappling with reduced demand for luxury goods, particularly in China, where economic uncertainty has led to more cautious consumer spending. Sales in Greater China plummeted by 27% during the quarter, while its watchmaking division experienced a 13% drop in sales. Conversely, sales in regions outside the Asia Pacific showed growth.
The quarter’s performance follows a disappointing financial report from Swatch Group AG, which cited a 70% profit drop due to declining Chinese demand, and a profit warning from Burberry Group Plc. Vontobel analyst Jean-Philippe Bertschy described Richemont’s sales as “reassuring” in light of the poor performance reported by its competitors.
The disparity between Jewellery and Watches sales may prompt concerns about inventory levels in the latter, according to Jefferies analyst James Grzinic. Amid a generational shift in management, Richemont, controlled by South African billionaire Johann Rupert, recently appointed Nicolas Bos as group CEO. Additionally, Louis Ferla, the former head of Vacheron Constantin, has taken over leadership at Cartier.
Richemont’s three leading jewellery brands, Buccellati, Cartier, and Van Cleef & Arpels, achieved a 2% sales increase at actual rates and a 4% rise at constant exchange rates. However, specialist watchmaker sales declined by 14% at actual rates and 13% at constant rates, with Japan partially offsetting reduced sales in Europe and Asia Pacific. Despite the downturn, Vacheron Constantin and A. Lange & Söhne performed well.
The group’s fashion, leather goods, and consumer sales platforms reported a 6% sales rise, driven by double-digit growth at Watchfinder and a 4% increase at the group’s fashion and accessories maisons. Positive momentum from Alaïa and Peter Millar helped counterbalance weaker sales at other maisons, including Chloe.
Richemont has yet to provide an update on the ongoing sale of Yoox Net-a-Porter, an asset currently classified under “discontinued operations.” The fashion site experienced a 15% decline in sales at both actual and constant rates in the first quarter.
In the first half of this year, Richemont saw a 14.1% increase in preliminary revenues, with sales amounting to 620.7 million euros, up from 544 million euros in the same period last year. Quarterly revenues were strong, with 312 million euros reported in the second quarter, compared to 309 million euros in the first quarter. Co-CEOs Luca Lisandroni and Riccardo Stefanelli attributed this growth to balanced increases across all sales channels, regions, and gender divisions.
July’s growth mirrored the first half’s performance, particularly in the Americas, where revenues rose 19.4% to 225.6 million euros, representing 36.4% of total sales. European revenues increased by 9% to 21.1 million euros, and Asian sales grew by 14.3% to 174 million euros. Global retail sales increased by 14.7% to 395.2 million euros, making up 63.7% of overall sales.
The company is also expanding its physical presence, with new store openings planned in Toronto, Wuhan, and an expanded boutique in London by the end of the year or early 2025. Additionally, a manufacturing plant in Solomeo is set to double in size, with more outlets planned in Italy.
As of June 30, 2024, Richemont’s net cash position was 7.3 billion euros, up from 6.6 billion euros in the same period last year. Jefferies noted in a report titled “Big In Japan” that Richemont’s performance should provide some relief after the negative outlook set by Swatch Group.
A report from Bernstein highlighted that Richemont’s jewellery houses, which contribute significantly to its profits, exceeded consensus projections with 2 percent growth, while the specialist watchmakers fell short of analyst expectations with a 3 percent decline.
The company has not yet provided an update on the ongoing sale of Yoox Net-a-Porter, which is listed under “discontinued operations.” The fashion site experienced a 15 percent decline in sales at both actual and constant rates in the first quarter.