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Richemont’s revenues dipped by one percent as demand collapsed in mainland China, Hong Kong and Macau. Sales in the region tumbled 27 percent in the six months through September, the Swiss luxury group said Friday.
In China, a lacklustre recovery from the coronavirus pandemic is dampening the economic optimism that typically drives luxury purchases. “The confidence factor is probably the most important; it is maybe at an all-time low. We have no clue how long it will last and don’t know if we’ve reached the bottom or not,” Richemont CEO Nicolas Bos said.
The dramatic decline in China offset resilience in other regions. Sales in Japan jumped by 42 percent at constant exchange rates, while sales in the Americas grew by 11 percent (10 percentage points faster than rival LVMH’s recent performance in the region). Europe sales increased by 4 percent; the Middle East and Africa by 11 percent.
Operating profit fell 17 percent to €2.2 billion ($2.4 billion). Shares fell 3 percent at market opening in Zurich on Friday morning.
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Luxury brands are struggling to navigate a sector-wide slowdown due to macroeconomic headwinds across key regions. Sales at Kering fell 16 percent in the third quarter, with sales at flagship brand Gucci’s revenue tumbling 25 percent. Fashion revenue at LVMH fell 5 percent, missing estimates. Among listed luxury companies, only Hermès, Prada Group and Brunello Cucinelli managed to grow during the quarter.
At Richemont, jewellery brands Cartier and Van Cleef & Arpels remained the bread-and-butter of its business, with sales increasing by 2 percent despite the slowdown in China.
But sales in Richemont’s watchmaking unit, which includes brands like IWC and Jaeger-Le Coultre, slumped by 17 percent, taking a huge hit from decreased Chinese demand. Watch sales were flat in North America and fell slightly in Europe.
Watch sales were “materially worse than expected,” Bernstein analyst Luca Solca wrote in a note to clients, noting that analysts had expected an 8.5 percent decline.
Richemont reported 2 percent growth for fashion and accessories, citing rising sales at Alaïa and Peter Millar that offset declines at Chloé, Delvaux and Dunhill. The segment reported an operating loss of €23 million, “reflecting varied performances and ongoing strategic investment to boost desirability and visibility,” Richemont said.
New designer Chemena Kamali’s first two collections for Chloé have been well received by press and gave a clear direction for marketing and merchandising with their renewed focus on supercharged femininity and Parisienne style, but sales have yet to pick up overall.
“We are working to reposition where Chloé is going. The business today does not fully reflect the attractivity of Chemena’s collections,” said Bos.
Richemont posted a €1.3 billion loss from discontinued operations, mainly due to a write-down on the value of e-commerce unit Yoox Net-a-Porter (YNAP), which will need to be recapitalised prior to an agreed sale to German rival MyTheresa.
The luxury conglomerate agreed to sell YNAP to Mytheresa with a cash position of €555 million ($603 million) and no financial debt, plus a €100 million revolving credit facility. Richemont, in turn, will receive a 33 percent stake in Mytheresa. The deal is expected to close in the first half of 2025.
