Luxury group Richemont’s sales jump in China while Europe slips

Cartier jewellery owner Richemont painted a mixed picture of the luxury sector in its latest results on Thursday, reporting a sales decline in Europe but a big increase in China.

The Swiss-based company said sales in constant currencies, which remove foreign exchange fluctuations, fell 3% in Europe as higher sales to Chinese tourists and domestic customers failed to compensate for lower spending by travellers generally, particularly from the United States.

Sales increased by 25% in China, including Hong Kong and Macau, the company said, countering concerns about a slowdown in the region as its economy cools.

Shares in the company were indicated to open 4.6% higher in pre-market activity on the Zurich exchange, with Bernstein analyst Luca Solca describing the results as a “comfortable beat”.

With currency effects removed, Richemont’s sales increased by 8% in three months Dec. 31, better than the 5% rise in the previous three months but lower than the 19% rise in the April to June period.

The luxury market has been buffeted in recent months by persistent inflation, high interest rates and more expensive mortgages in the United States while a slower than expected recovery in China after COVID-19 shutdowns have also weighed on the sector.

Despite what Richemont described as an uncertain economic and geopolitical environment, the company’s jewellery business – which also includes Van Cleef & Arpels – continued to do well, with sales up 12%.

Kepler Cheuvreux analyst Jon Cox described the results as a “solid print”, highlighting strength in the Americas, where sales rose 8%.

“Are we out of the woods for luxury? Not by a long shot, and the first half of 2024 is likely to be tricky,” he said.

“However, I would be loathe to bet against the sector given its GDP multiplier characteristics, strong barriers to entry and where ‘Made in Europe’ is actually a strength and competitive advantage.”