Richemont reports higher Q4 sales, but misses market estimates

Zurich — Richemont reported higher quarterly sales on Wednesday as tourists returned to Europe and Japan, but the luxury group missed market estimates after sales in China plunged by almost a quarter.

American tourists took advantage of the stronger dollar to buy their Cartier jewellery and Swiss watches outside the US in the December quarter, leading to a sharp rise in sales in Europe and Japan.

But the mainland Chinese market — which accounts for about a fifth of the group’s sales according to Zuercher Kantonalbank estimates — struggled as Covid-19 cases surged during the period, Richemont said.

Sales in mainland China fell 24% in constant currency terms as customer traffic dwindled and staff were not available, leading to a reduction of boutique hours or temporary closures of sales points, the company said.

Overall, Richemont’s sales rose 8% to €5.4bn ($5.82bn) in the three months to the end of December, up from €4.98bn a year earlier.

The figure missed the €5.67bn forecast by analysts. When currency movements were excluded, the company’s sales increased by 5%.

Investors reacted negatively to the sales update, with Richemont stock indicated 4.9% lower in pre-market activity, though analysts said the weak performance in China was likely to be a temporary blip.

The Covid-19 wave has peaked in major Chinese cities, leading to store reopenings, a rise in customer traffic and expectations of a strong rebound before the Lunar New Year holidays, a Richemont spokesperson said on Wednesday.

“The impact from China is massive, but we see it as temporary,” Bank Vontobel analyst Jean-Philippe Bertschy said. “The catch-up from Chinese consumers will come as strong as sales decelerated in 3Q, as they were able to save money during the lockdowns.”

In Japan, sales increased by 30% during the quarter, aided by “solid” domestic sales and a gradual return of tourism. The lifting of Covid-19 restrictions mid-October and a comparatively weaker yen also helped, Richemont said.

In Europe, sales increased by 17% helped by strong local demand and returning tourists, particularly from the Middle East and the US.

However, the Asia-Pacific region saw overall sales fall by 7%, the company said.

Reuters