Richemont says sales up 14%, boosted by Chinese consumers
A rebound in China has given luxury goods holding company Richemont a 14% year-on-year boost in sales growth (or about 19% at constant exchange rates), which made up for muted sales in the Americas. But the rebound is slower than expected, suggesting consumers are pulling back on spending.
Reflecting on its sales in the first quarter of 2023, Richemont issued an ad hoc announcement on Monday in line with European Union listing rules, which showed it had a solid start to the financial year.
It said performance was driven by higher sales across almost all regions and distribution channels and all business areas, at actual exchange rates, with a strong rebound in Asia Pacific “more than” offsetting muted sales in the Americas.
Retail now comprises 68% of the group’s sales, with direct-to-client representing 74% of sales.
Most of the growth emanated from Richemont’s Jewellery Maisons (up 19% at actual exchange rates), followed by the Specialist Watchmakers (up 6%) and Other (including the Fashion & Accessories Maisons, which is up 5%).
At 19%, the sales growth rate in the quarter ended June 2023 was well above the 12% sales increase of the prior-year period. All channels, business areas and regions, excluding the Americas, generated higher sales compared with the prior-year period.
Asia Pacific rebounded strongly, by 40%, which is its best regional performance. It attributed this to favourable prior-year period comparatives, as well as the scrapping of Covid-related restrictions and the reopening of borders in mainland China, and the “special administrative regions” of Hong Kong and Macau in January 2023, which resulted in double-digit growth in the mainland and triple digits in the latter two regions.
Sales in Australia and Taiwan were “solid”; Japan was up 14%; in Europe, they rose by 11%; but in the Americas, they were down 2%.
In the Middle East and Africa, sales rose by 15%, boosted by higher domestic and tourist spending in Dubai.
Overall, retail sales were up 24%, driven by increases in all regions and double-digit increases across all business areas, led by the Specialist Watchmakers, followed by the Jewellery Maisons.
Direct-to-client sales represented 74% of group sales, which is up 200 basis points from a year ago.
As at 30 June 2023, the group had a net cash position of €6.6-billion (up from €5.4-billion in 2022).
The interim results for the current financial year will be announced on Friday, 10 November 2023.
Investors had expected China’s economy to rebound strongly after Beijing dropped Covid restrictions in January, but the latest data show worrisome signs of a slowdown.
China’s economy expanded 6.3% in the second quarter from a year ago, falling short of market expectations as export demand remained tepid and sinking property prices took a toll on consumer confidence.
Compared with a year earlier, China’s GDP in the April to June period had grown by 6.3%, the national bureau of statistics said on Monday, although economists had forecast growth to accelerate to 7.3%, reported Reuters.
In January, China finally opened its borders after dismantling its Covid-Zero policy, which saw the country’s 1.4 billion-strong population under sporadic lockdown for three years as the government sought to contain the pandemic.
The end of the pandemic restrictions unleashed a rebound in luxury spending in the country but its recovery is slower than expected.
Richemont shares fell as much as 10%, the steepest intraday decline in more than year.
On Friday, Burberry reported that its overall sales were up as much as 18%. China’s bounceback gave the luxury brand a boost. Group sales, excluding mainland China, were up 11%, with Europe, the Middle East, India, and Africa 17% higher. South Asia Pacific rose 39%, Japan rose 44% and China jumped 46%.
Fashion Network reported that the Americas remained the main problem region and was down 8%, a trend seen this year in which luxury businesses have faced major challenges.
In May, LVMH shares soared to a record high, making it the first European company to surpass $500-billion in market value, reported the New York Times. Its French rival, Hermès, said sales in Asia (excluding Japan) were up 23% in the first quarter, “driven by a very good Chinese New Year”. DM