Richemont’s Resilience in Jewelry Offsets China Watch Slump
(Bloomberg) — Richemont posted a slight rise in sales in the first quarter as solid results from its jewelry brands offset declines from China and its luxury watchmakers.
The Cartier owner reported a sales gain of 1% at constant currencies to €5.3 billion ($5.8 billion). That was in line with analyst forecasts and compares with double-digit gains a year earlier. The company said jewelry sales — which account for the bulk of its revenue and profit and also include the Van Cleef & Arpels and Buccellati brands — showed resilience, rising 4%.
Richemont shares edged down 0.5% in Zurich after initial gains. They’re down 1.3% over the past 12 months.
The Swiss company, which also owns watch brands Vacheron Constantin, Jaeger-LeCoultre and Piaget, is facing slowing demand for its pricey products, particularly in China, where consumers have turned cautious as the economy falters.
Sales in Greater China plunged 27% during the quarter, the company said, while its watchmaking division posted an overall drop of 13%. Sales in all regions beyond Asia Pacific were higher.
Richemont’s report follows worse-than-expected financial results from Swiss watchmaking rival Swatch Group AG, which posted a 70% drop in profit it blamed on collapsing demand from China, and a profit warning from luxury giant Burberry Group Plc.
The quarter saw a “reassuring, robust sales performance from Richemont, given the shock of Burberry and Swatch Group yesterday,” Vontobel analyst Jean-Philippe Bertschy said in a note to clients.
While Richemont’s results should be met with some relief, “the divergence in Jewelry and Watches performance will trigger questions around the inventory position in the latter,” Jefferies analyst James Grzinic said.
Amid a generational shift in management, Richemont — controlled by South African billionaire Johann Rupert — recently named Nicolas Bos as group CEO. The company said the former head of its Vacheron Constantin watch brand, Louis Ferla, would take over running Cartier, the French jewelry maker that is Richemont’s top selling brand.
(Updates with share reaction in paragraph three and further analyst comments)
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