Cartier-owner Richemont said Tuesday its quarterly sales in China tumbled by 27 percent as the deepening economic malaise in the world’s second-largest economy lashes luxury firms.
The Swiss luxury group said overall sales dipped one percent to 5.27 billion euros (USD 5.74 billion) in its first quarter that ended June 30, with growth seen in the Americas, Japan and Europe.
Lacklustre demand in China
But sales in the Asia Pacific region excluding Japan — Richemont’s top sales area — fell by 19 percent to 1.8 billion euros, and by 27 percent in China, Hong Kong and Macau.
“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 Macau over the prior- year period,” the company said in a statement.
Bernstein analyst Luca Solca said the company’s performance “confirms lacklustre demand in Mainland China”.
Data released Monday showed the Chinese economy’s growth slowed to 4.7 percent in the latest quarter that ended June 30, while retail sales growth dropped to two percent in June.
China has become a key market for luxury firms in recent years thanks not only to its rising ranks of millionaires but also the swelling middle class. But a property market crisis and slowing overall economic growth has chilled luxury spending.
Burberry switched chief executives on Monday as it seeks to stem “disappointing” sales, including a 21 percent drop in comparable stores sales in mainland China last quarter. Swiss watch group Swatch, which owns a number of luxury brands including Omega, reported a “sharp drop in demand for luxury goods in China”.
Jewellery division drives sales
Richemont’s quarterly performance was carried by its main jewellery division, which saw its growth edge two percent higher to 3.65 billion euros. That beat the consensus analyst forecast of 3.63 billion euros compiled by Swiss financial news agency AWP.
Analysts viewed Richemont’s performance as good given the context and the fact that the same period last year provided a difficult base for comparison. “Reassuring, robust sales performance from Richemont, given the shock of Burberry and Swatch Group yesterday,” said analyst Jean-Philippe Bertschy at Vontobel.
“Once again, the Jewellery Maisons are showing great resilience with strong demand across the board,” he added.
RBC Capital Markets said “should offer some relief, particularly in a challenged luxury sector that is showing accelerating signs of divergent brand and category performance.”
Richemont shares rebounded from initial losses to stand 1.2 percent higher in late morning trading while the Swiss market was down 0.4 percent overall.
Analyst Jon Cox at asset manager Kepler Cheuvreux told AFP that while the China sales figures are disappointing “the Chinese are buying when they travel as can be seen with strong growth in Japan on the back of tourism.”
For Richemont, Japan posted the largest percentage gain in sales, soaring 42 percent to 603 million euros.
Sales rose by 11 percent in the Americas to 1.2 billion euros and added four percent in Europe to 1.2 billion.
“Richemont is one of our preferred picks in luxury amid its jewellery resilience,” Cox said.
In the last quarter of last year, Richemont, like other luxury giants, announced the creation of a division dedicated to perfume and beauty, however, this new business area does not yet appear as such in the group’s quarterly reports.
