Richemont Sales Up 6%, Defying Deepening Luxury Downturn

Swiss conglomerate Richemont defied a deepening downturn in luxury demand as sales grew 6 percent at constant exchange rates for its first fiscal quarter ending June 30.

Persistent demand for jewellery is driving growth for the group, which owns the category’s biggest and most famous brand, Cartier, as well as fast-growing Van Cleef & Arpels and Buccellati. Richemont’s jewellery maisons grew 11 percent in the quarter, the group said, as customers continued to splash out on “Juste un Clou” bracelets and “Alhambra” clover pendants despite higher prices fuelled by rising costs of materials, particularly gold.

Jewellery brands have outshined other luxury categories in recent quarters as customers see greater and more enduring intrinsic value in precious metals and stones than in handbags, where brands from Chanel to Dior raised prices too high too fast in the wake of the coronavirus pandemic. Global jewellery names also continue to eat up white space in a market still dominated by unbranded and white-label product.

Richemont’s watch sales slumped 7 percent, with the group citing pressure from China, Hong Kong and Macau as well as Japan. But the category has regained momentum in the key US market, with sales up by double-digits.

Sales were broadly stagnant in the group’s other businesses including fashion, falling 1 percent despite “solid momentum” at Alaïa and Peter Millar, an “encouraging” performance at Chloé and “robust growth” at retailer Watchfinder. Rival fashion groups are expected to fare more poorly during the quarter, with analysts’ forecasting double-digit declines for both Kering and LVMH’s fashion and leather goods division.

Currency shifts are emerging as a key headwind for luxury groups this year. A stronger euro and Swiss franc — the principal currencies for European brands’ cost base — and weakening currencies in key export markets like the US are piling on pressure despite robust hedging policies. Richemont’s sales grew just 3 percent at current exchange rates.

In terms of regions, Richemont signalled strong growth in Europe (powered largely by tourists and top-end activations like high jewellery shows), the US, the United Arab Emirates, South Korea and Australia. Sales in China, Hong Kong and Macau continued to slump amid a continued real estate crisis, consumer uncertainty linked to Trump’s trade war and changing tastes that have shifted away from conspicuous items from global luxury names.

Sales in Japan also declined, normalising after a period of stellar growth driven by foreign shoppers taking advantage of a weaker yen.

Richemont’s profile among investors has steadily risen in recent years: shares in the company are up 7 percent over the past year, during which time the valuations of LVMH and Kering have both slumped by more than one-third.

The group was previously penalised for its over-dependence on China as well as the volatile, wholesale-driven watch category, not to mention chairman Johann Rupert’s decisions to pour billions into loss-making e-commerce unit YNAP. But with consistent growth at Cartier across regions, jewellery now dominates the group’s balance sheet, overshadowing the challenges in watches and fashion, while a sale of YNAP to MyTheresa closed this spring.

Richemont’s profitability is likely to take a hit this year from currency swings, tariffs and the higher cost of gold and other materials, Citi analyst Thomas Chauvet said, but Richemont remains a “fundamentally stronger business than in the past: greater scale, more balanced product and geographic mix, greater supply chain agility…cleaner inventories in wholesale, stronger balance sheet, and strengthened management.”

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The Swiss owner of Cartier, Van Cleef & Arpels and other brands has avoided the luxury slump. Sluggish watch sales and local competition in China threaten to spoil the party.