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A strong performance in China and the US helped to offset declines in Europe for Richemont in the quarter ending 31 December 2023. Shares in the Swiss luxury conglomerate were up 8 per cent in morning trading.
Richemont’s sales grew 8 per cent year-on-year at constant exchange rates to €5.6 billion in Q3, it said on Thursday; above consensus expectations of 7 per cent. It marks an acceleration compared to the previous quarter (up 5 per cent) and comes as a reassuring sign for the wider luxury market, which saw a dip in demand last year, leaving many brands and retailers with an overhang of stock. Last week, British luxury brand Burberry issued a profit warning after its retail sales were lower than expected over the holidays.
Richemont’s growth in Q3 was led by Asia Pacific (up 13 per cent), fuelled by a 25 per cent leap in Mainland China, Hong Kong and Macau. Richemont noted, however, that this was based on favourable comparables, as the spike in China’s Covid cases at the end of 2022 interrupted footfall throughout that period.
Meanwhile, its performance in the US in Q3 was a “pleasant surprise”, says Antoine Belge, head of luxury goods at Exane. The results suggest American shoppers are no longer flocking to Europe to spend their cash: Richemont’s sales in the Americas rose by 8 per cent, driven by resilience in the economy, a contrast to Europe, where they fell 3 per cent.
By division, jewellery — which includes Cartier and Van Cleef & Arpels — led the way, beating expectations to rise 12 per cent. Sales in Richemont’s specialist watchmakers arm, featuring IWC, Piaget and Jaeger-LeCoultre, were up 3 per cent, in line with consensus.
The “other” business area, which includes Chloé, Montblanc and Alaïa, saw a 1 per cent sales decline. “Lower wholesale and online retail sales were largely mitigated by mid-single digit growth in retail sales, markedly driven by the performance at Alaïa, Delvaux, Dunhill and Peter Millar,” the company said in a statement.
Chloé is in transition mode following the appointment of new creative director Chemena Kamali, whose runway debut will be in February, and new CEO Laurent Malecaze, who joined in December from Dunhill.
Last month, Richemont announced that its agreement to sell a majority stake in Yoox Net-a-Porter (YNAP) to Farfetch and investment firm Symphony Global had been terminated, following the sale of Farfetch to South Korean e-commerce giant Coupang. This sparked questions about what’s next for YNAP, which analysts estimate has been struggling with losses since Richemont acquired it in 2018.
YNAP — presented as “discontinued operations” — saw sales drop 11 per cent in the third quarter. Richemont stressed the “continued challenging environment for pure play online distributors”. It said it is reviewing “strategic options” aimed at finding a new controlling shareholder for YNAP. “This process is kicked off. We see interest,” Richemont group CFO Burkhart Grund told analysts on a call.
Overall, he remained optimistic about Richemont’s performance for 2024. “We go into this quarter with a certain degree of confidence,” Grund said while noting the challenging comparison basis in the quarter ending 31 March.
“This is further evidence that category leaders (Richemont in jewellery, Hermès and LVMH in fashion and leather goods) and self-help stories are diverging, as the recent Burberry results testified,” said Luca Solca, managing director of luxury goods at Bernstein, stressing that Kering and Ferragamo are also under pressure.
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