Richemont sales growth returns

A pedestrian walks past a Cartier store, operated by Richemont, as it stands illuminated at night in Shanghai, China. Picture: Bloomberg

It was a great festive season for Richemont as the luxury goods company surprised markets with an upbeat trading update for the quarter ended December, which sent the company’s share price soaring as much as 7.85% in intraday trade on the JSE.

Richemont said on Thursday sales had increased by 5% at constant exchange rates in the period under review, with most regions showing growth driven by jewellery sales.

Forecasts had been for flat growth for the company. This is the first time the Geneva-based group has recorded growth in sales since the five months ended August 31 2015.

"The Christmas quarter was clearly ahead of expectations and especially the strong growth in Jewellery Maison is a very positive development, as this segment is by far the largest earnings contributor," analysts at Vontobel said.

Measured at actual exchange rates, Richemont’s fastest-growing region in the December quarter was Japan, where sales grew 11% to €313m. Sales in its largest region, Asia-Pacific, were up 9% to €1.13bn, and in the Americas, sales rose by 9% to €559m, boosted by the reopening of the Cartier Mansion in New York.

"In Europe, sales increased by 3% in the third quarter, in contrast with the 17% decline registered in the first six months of the year. This improvement was primarily driven by robust local sales and tourist purchases in the UK," said Richemont.

"Growth in sales in the Asia Pacific region reflected strong performances in mainland China and Korea, mitigated by continued declines in Hong Kong and Macau."

The results were particularly exciting for the market as there had been serious concerns about the health of the sector. Luxury brand companies across Europe have been struggling for the past year or so, hit by terror attacks in key shopping spots as well as the general slowdown in the world economy.

The trend has been particularly pronounced in Switzerland, where companies face the added difficulty of the strong Swiss franc.

Watch sales, which make up about half of Richemont’s revenue, started to decline in 2014 when political protests in Hong Kong put an end to mainland Chinese shopping sprees. Islamist attacks in Paris in November 2015 dealt another blow, also hitting the generally more buoyant jewellery segment. Richemont owns
well-known luxury brands, including Cartier, Van Cleef & Arpels, Giampiero Bodino
and MontBlanc

Vontobel analysts said the fourth-quarter results were also likely to be positive, benefiting from a more favourable comparison. Of the four Bloomberg analysts who rate the share, one has it as a buy, one as a sell and two as a hold. In the past year the share price has declinedby 5.61%.

Richemont’s share price closed 6.02% higher at R102.89.