LONDON — A forward-looking strategy to cultivate the local clientele in top markets has paid handsome dividends at Compagnie Financière Richemont, which saw sales rocket in the fiscal third quarter, in Europe and America in particular.
It wasn’t COVID-19 that spurred Richemont to pay extra attention to the locals, but rather Richemont’s leadership that insisted the luxury giant become less dependent on international tourism, and cultivate a broader audience with new products, a wider range of prices, and a mix of online and in-store sales and events.
The seasoned entrepreneur Johann Rupert, Richemont’s founder and chairman, is accustomed to projecting far ahead, and is also aware that while he can make, market and sell fine jewelry and luxury goods, he has no control over macroeconomic events or political developments in the various regions where Richemont makes its money.
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The group began enacting its localization strategy some six years ago, which helps to explain why it was able to continue selling through the pandemic, and why third-quarter sales in Europe — which has been devastated by a lack of tourism — rose 44 percent to 1.41 billion euros compared with the corresponding period last year, and 12 percent compared with two years ago.
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The Americas region grew at an even more impressive rate: in the three months they climbed 59 percent year-on-year to 1.33 billion pounds, and were up 53 percent compared with two years ago.
Not every business leader can see quite as far ahead as Rupert. Myriad luxury companies’ European businesses suffered during the pandemic when those tourist-packed planes were grounded, and they were forced to devise strategies to lure local clients into stores.
Burberry, which also published its third-quarter results on Wednesday, is a case in point. While it’s a different business, its clientele overlaps with that of Richemont.
Burberry touted the recovery of its European business, which was hit hard during the pandemic when the tourists stopped coming. The EMEIA region, Burberry said, “improved significantly” in the third quarter, with comparable store sales down 17 percent compared with two years ago, and full-price comparable store sales falling only 4 percent.
“We are very encouraged by the performance given the ongoing drag from the lack of tourists, which accounted for around 40 percent of pre-pandemic revenues in the region,” said Julie Brown, Burberry’s chief operating and chief financial officer, adding that Burberry has been making a big effort to appeal to local shoppers, with physical and digital activations.
Richemont’s jewelry maisons — Cartier, Van Cleef & Arpels and Buccellati — were the engine behind the sales spike in the three-month period, and benefitted from upbeat marketing initiatives, such as the latest Cartier Love campaign.
The worldwide campaign featured an international, multigenerational cast including Willow Smith, Jackson Wang, Lily Collins, Monica Bellucci, Maisie Williams and Australian singer-songwriter Troye Sivan. They sang, danced and shook their jewels to the ’70s tune “Love Is All” by Roger Glover.
The lighthearted campaign was well-received at a time when many people were stuck at home and unable to travel and visit family due to pandemic restrictions.
In the three months, sales at Richemont’s jewelry maisons rose 41 percent to 3.34 billion euros, compared with last year, and 55 percent compared with two years ago.
Richemont said the sales progression was broad-based across product lines and price points. Sales grew in the double digits in all regions and across all channels.
The company also noted that, during the period, the specialist watchmakers, such as IWC, “reaped the benefits of prior investments and client-centric activities,” and saw sales increase by 29 percent to 977 million euros compared with last year and by 19 percent compared with two years ago.
The division saw double-digit growth in most regions and watch maisons.
Overall, revenues for the Swiss luxury group increased 35 percent to 5.66 billion euros in reported terms on the prior-year period, and grew 32 percent at constant currency rates, significantly outpacing consensus estimates.
Compared with the same three months in 2019, they gained 36 percent and 38 percent, respectively.
Other business, which include the fashion and accessories houses Alaïa, AZ Factory, Chloé, Dunhill, Montblanc and Peter Millar, also increased strongly, with sales up 40 percent to 610 million euros, representing 17 percent growth on the third quarter of 2019.
Growth was sustained by the Chloé, Montblanc and Peter Millar brands, the company said. At like-for-like structure — excluding the Delvaux business acquired in June last year — sales for the division grew 11 percent on the third quarter of 2019.
Broken down by distribution channel, retail sales increased 49 percent to 3.4 billion euros, while the online retail business progressed 22 percent to 1.03 billion euros.
“Direct sales to consumers have further strengthened to reach 78 percent of group sales compared to 75 percent in the prior-year period,” Richemont said.
In Asia Pacific excluding Japan, sales grew 23 percent to 2.13 billion euros, while in Japan, they were up 16 percent to 389 million euros. In the Middle East and Africa, revenues increased 33 percent to 398 million euros.
Bernstein’s Luca Solca said Richemont “smashed” third-quarter expectations, with 32 percent organic growth versus a company-reported consensus of 17 percent, and Bloomberg’s projection of 18 percent, with all divisions and regions were beating expectations.
Solca said he believes that two main factors will shape the luxury sector performance this year: “the trajectory of Western luxury demand normalization and the trajectory of macroeconomic performance in China.”
He said that Richemont’s latest update “seems an indication that global luxury demand remains in very good health and that we are entering the year with strong momentum.”
Richemont did not offer anymore information on Wednesday about its proposed tie-up with Farfetch. An update is expected when Richemont releases its fourth-quarter and year-end results in May.
As reported in November, Richemont confirmed it is in “advanced” discussions to merge its Yoox Net-a-porter platform with Farfetch, building on a high-profile partnership forged a year ago.
The plan is to create a neutral, industrywide platform, built on the latest omnichannel retail technologies, to support the digitization of the luxury industry.
Richemont’s shares closed up 5.1 percent at 141 Swiss francs.
With contributions from Alex Wynne