Asia demand lifts Richemont sales
The luxury goods retailer says that wholesale revenue declined while that from retail revenue grew, reflecting the shift from traditional retailers to online-based sales
Richemont, maker of Cartier watches, reported its fastest holiday sales growth in four years, boosted mainly by demand in Asia. A strong middle class and steady economic growth in that territory allows for consumers to spend on luxury and specialty items.
In November, the Chinese government announced plans to cut tariffs for up to 187 products, citing the need to help consumers access quality and specialty products that were not widely produced locally.
In a trading update released on Monday, the company said double-digit growth in Asia Pacific was driven by mainland China, South Korea, Hong Kong and Macau, bolstered by Jewellery Maisons and Specialist Watchmakers.
Neil Brown, co-head of Electus Fund Managers said sometimes results looked good because of “base effects” and Asia, especially Hong Kong and Macau were being compared with a low base 12 months ago. However, growth in Asia Pacific in the wholesale channel was offset by declines in other regions as retailers struggled to reduce inventory.
Wholesale sales decreased by 3%, which the luxury retailer said reflected “qualitative upgrades to its external distribution network and the monitoring of inventory at its multibrand retail partners”.
Brown was not surprised by the performance update as there had been a continuation of Richemont retail outperforming wholesale stores. He expected this trend to continue as Richemont preferred “the ability to control and focus its own stores”, Brown said.
Favourable currency movements, the internalisation of external points of sales and the anticipated introduction of a value added tax in the United Arab Emirates led to sales in the Middle East and Africa rising 11%. Revenue gained 7% excluding currency shifts in the three months to end-December, the Geneva-based company said on Thursday. Richemont’s net cash position at the end of December 2017 stood at €5.1bn compared with €5.2bn in 2016.
The retailer did not give much away on the progress of its online offerings, which it previously said would be one of its key areas of focus. It has made executive recruits in the past 12 months in this regard. Other brands in the Richemont stable include Chloé and Dunhill.
Richemont’s share price added 0.08% to close at R114.85 on Thursday. In 2017, it ended the year 23% stronger.