Richemont First-quarter Sales Tarnished by Lackluster Chinese Demand, Tough Comparatives

LONDON — Lukewarm demand in China coupled with tough comparatives in the previous year dented first-quarter sales at luxury giant Richemont , parent of brands including Cartier , Van Cleef & Arpels and Dunhill .

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In the three months to June 30, sales at actual exchange rates were down 1 percent to 5.27 billion euros. At constant exchange, sales rose 1 percent, the company said in a trading statement on Tuesday.

The performance was broadly flat against the fourth quarter of last year, when sales declined 1 percent at actual rates, and rose 2 percent at constant ones.

The comparatives with last year were particularly tough. In the first quarter of fiscal 2023-24 Richemont sales grew 14 percent at actual rates and 19 percent at constant exchange.

In the first quarter of the current year all regions, with the exception of Asia Pacific, delivered growth at actual and constant exchange. Asia Pacific saw sales decline 19 percent at actual rates, and 18 percent at constant exchange.

Richemont said that higher sales in South Korea and Malaysia only partially mitigated a 27 percent decline in China, Hong Kong and Macao 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 Macao over the prior-year period,” Richemont said.

Rival Swatch Group was feeling worse pain earlier this week, posting a 70.5 percent drop in first-half net income, and a revenue decline of 10.7 percent at constant exchange rates.

In the quarter, Richemont’s European sales increased by 4 percent at actual rates, and 5 percent at constant ones, driven by resilient local demand and stronger tourist purchases, according to the company.

In the Americas region, sales were up 11 percent at actual rates and 10 percent at constant ones, reflecting “sustained domestic demand across all distribution channels.”

Japan generated the strongest regional growth, with sales rising 42 percent at actual rates and 59 percent at constant ones, despite strong comparatives in the prior-year period.

Richemont said that growth came from robust domestic demand and “thriving” tourist spending from Chinese, South Korean, Southeast Asian and American clients, favored by a weakened yen.

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Sales in the Middle East and Africa were up by 8 percent, benefiting from growing domestic and tourist spending in the United Arab Emirates and Saudi Arabia in particular.

The group’s three jewelry brands, Buccellati , Cartier and Van Cleef & Arpels, delivered 2 percent sales growth at actual rates and 4 percent at constant exchange against demanding comparatives.

Sales at the specialist watchmakers declined by 14 percent at actual rates and 13 percent at constant ones, with Japan only partially offsetting lower sales in Europe and Asia Pacific, particularly in China, Hong Kong and Macao, Richemont said.

The company said that Vacheron Constantin and A. Lange & Söhne performed strongly in the challenging period.

The group’s fashion, leather goods and consumer sales platforms generated a 6 percent sales increase, underpinned by a double-digit progression at Watchfinder and 4 percent growth at the group’s fashion and accessories maisons.

Richemont said the ongoing momentum of Alaïa and Peter Millar broadly compensated for softer sales at most of the other maisons, including at Chloé, where the debut collection under the new creative director only reached stores at the end of the first quarter.

The company did not update on the sale process at Yoox Net-a-porter , a company it classifies under “discontinued operations” with the assets held for sale. The fashion site saw sales decline 15 percent at actual and constant rates in the first quarter.

Richemont said its net cash position on June 30 stood at 7.3 billion euros, compared with 6.6 billion euros in the corresponding period last year.

In a report titled “Big in Japan,” Jefferies said that Richemont’s first-quarter performance “should be met with some relief after the unhelpful setting of the scene by [Swatch Group] some 24 hours ago.”

Bernstein noted that the jewelry houses, which produce the bulk of Richemont’s profits, beat consensus projections of 2 percent, while the specialty watchmakers fell well short of analyst expectations of a 3 percent decline.

Richemont shares were broadly flat on Tuesday, closing at 138.35 Swiss francs.

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