Richemont’s earnings disappoint with customers under financial pressure
The company is the latest luxury specialist to flag a slowdown in recent months as the post-Covid-19 pandemic spree wears off
Zurich — Luxury group Richemont reported weaker than expected earnings on Friday as the owner of Cartier jewellery said the rising cost of living, economic headwinds and geopolitical tension were weighing on customers’ spending.
The company, which also owns several high-end Swiss watch brands like IWC and Vacheron Constantin, is the latest luxury specialist to flag a slowdown in recent months as the post-pandemic spree wears off.
In October, French rival LVMH reported a slowdown in demand for high-end goods in the US and Europe where rising prices have prompted shoppers, especially younger generations, to cut back on spending.
Richemont’s constant currency sales growth eased from a 19% rate in the April to June period to a 5% rate in the following three months.
Overall for the six month period to the end of September, Richemont's sales rose 6% to €10.22bn, short of the €10.34bn expected by analysts.
The company posted a profit of €1.51bn, worse than the €2.17bn forecast by analysts in a consensus cited by Zuercher Kantonalbank.
“Growth eased in the second quarter as inflationary pressure, slowing economic growth and geopolitical tensions began to affect customer sentiment, compounded by strong comparatives,” chair Johann Rupert said in a statement.
“Consequently, we have seen a broad-based normalisation of market growth expectations across the industry.”
Over the April to September period, Richemont’s results showed contrasting fortunes for its watches and jewellery businesses.
While jewellery — traditionally more resilient to economic swings — continued to shine with constant currency sales up 9%, watch sales fell 4%.
Analysts expected Richemont stock, which has gained 8.5% over the past 12 months, to react negatively to the results.
Still, despite missing sales and profit expectations, the company’s performance in the US and in jewellery sales were better than expected, said Kepler Cheuvreux analyst Jon Cox, noting that the outlook for a soft landing and expectations for improvement in China were “remarkably decent”.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.