Nicola Mawson
Luxury goods company, Richemont – controlled by South African billionaire Johan Rupert – slightly increased sales in the three months to end June by 1% in constant currency to €5.3 billion (R104bn), delivering results that were somewhat better than its peers, even though this figure was 19% down from a year ago .
However, Richemont said its sales in the quarter were constrained by the Asia Pacific region, where items sold declined 18%. It also noted higher sales in South Korea and Malaysia only partially mitigated a 27% decline in China, Hong Kong and Macau combined.
“The decline reflected both the low-level of consumer confidence and the strong comparatives ranging from double-digit growth in the mainland to triple digits in Hong Kong and Macau over the prior-year period,” it said.
All other regions contributed growth, with sales in Europe up 5%, the Americas gained 10%, while the strongest regional sales growth was once again generated in Japan at 59% compared with 14% in the year-ago period.
Sales in the Middle East and Africa rose by 8%, benefiting from growing domestic and tourist spending in the UAE and Saudi Arabia.
The group’s share price moderated slightly by 0.3% to R2 791.58 per share by 4pm. This was a continuation of its seven-day performance, which saw its stock decline 1.28%. Moreover, Richemont said sales dropped 1% in comparative currency rates. In the comparative period last year, Richemont sales gained 19%.
Richemont which is home to brands such as Jaeger-LeCoultre, Chloé, Delvaux, Dunhill, Montblanc, Peter Millar, Purdey, and Serapian noted that sales in its wholesale channel declined, though this was offset by sales growth in the retail and online retail channels.
Retail purchases, which accounted for 69% of all items sold increased by 2%, which was mostly driven by mid-single digit gains at the Jewellery maisons.
Online retail sales rose by 6%, sustained by growth at Watchfinder as well as the Jewellery and Fashion and Accessories maisons. The 5% sales decline in the wholesale channel primarily reflected weaker performance in Asia Pacific.
The group’s three Jewellery Maisons: Buccellati, Cartier and Van Cleef & Arpels delivered a 4% improvement in sales against what Richmont called “demanding comparatives” after a 24% gain a year ago.
Specialist Watchmakers’ sales dropped 13% as Japan’s “noteworthy” performance only partially offset lower sales in Europe and Asia Pacific, particularly in China, Hong Kong and Macau combined.
Excluding YOOX NET-A-PORTER (which is discontinued and saw sales decline 15%), Richemont’s net cash position gained to €7.3bn from the prior year’s €6.6bn.
Old Mutual Wealth private client securities research analyst Tasneem Samodien pointed to lower consumer demand given the high interest rate and escalating geopolitical tensions as weighing on the luxury goods sector.
“In this context, Richemont’s sales update was well received,” she said. Yet, Samodien noted that the Specialist Watches unit underperformed expectations. Japan’s performance surprised on the upside,” she said.
“Favourably, market research indicates sustained high desirability-levels for the group’s flagship brands Cartier, Van Cleef & Arpels, and Vacheron Constantin which is expected to support growth throughout the course of the year and speaks to the importance of brand identity during periods of macro-economic and geopolitical uncertainty.”
In the context of the peer group, it does appear that Richemont’s jewellery portfolio has also been supported by the appreciation of precious metals over the period, positioning the group’s iconic jewellery pieces as good investment alternatives, said Samodien.
BUSINESS REPORT