This story was updated at 1:30 p.m. ET on Jan. 15.
LONDON — Richemont had a rollicking holiday season with sales up 11 percent to 6.4 billion euros, fueled by fine jewelry classics, spinoff collections and the start of a rebound in the struggling specialist watch category.
Third-quarter sales at constant exchange rates beat analysts’ expectations and gave the luxury sector a glimmer of hope.
RBC’s Piral Dadhania said Richemont “has set a high bar to kick off this earnings season,” while Chloe Tedford-Jones, apparel analyst at Global Data, said that as the earnings season progresses, Richemont’s latest update sets a “cautiously optimistic” tone for the luxury sector.
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“While growth is uneven across regions and categories, demand for elevated luxury and heritage-driven categories remains intact,” Tedford-Jones added.
At actual exchange rates, sales in the quarter ended Dec. 31 were up 4 percent against tough comparisons from last year, soaring raw material prices and generally weak demand.
Growth came mainly from the jewelry division, where Richemont has been building on the momentum of its classic designs and releasing new iterations, such as the ultra-successful Cartier Love Unlimited collection, to tempt new audiences.
Other new styles driving sales in the period included Cartier’s ultra-light titanium Santos watch and the automatic Tank Louis Cartier.
In jewelry, big sellers included the updated Juste un Clou bracelet, the Vintage Alhambra pendant from Van Cleef & Arpels and Buccellati’s new Étoilée Color collection, which has replaced classic diamonds with precious gemstones.
At constant exchange, jewelry sales were up 14 percent to 4.79 billion euros, while at reported rates they rose 6 percent. Richemont said jewelry was up in the double digits across all channels and all regions, with the Americas, the Middle East and Africa and Japan enjoying the highest growth rates.
Sales at the specialist watchmakers made an unexpected 7 percent leap to 872 million euros. It was the second consecutive positive quarter for watches, with growth across all regions, powered by double-digit performances in the Americas and Middle East and Africa.
Analysts had been expecting growth in the division to be flat.
Stripping out China, Barclays said that growth in the specialist watchmaking division was even stronger, while in the Americas it was likely up in the double digits. At reported rates, sales in the division rose 1 percent.
Sales in Richemont’s “other” business area, which includes fashion, were flat against tough comparisons last year, and down 5 percent at reported rates.
The fashion and accessories maisons, which sit within the “other” division, saw sales climb 3 percent with Peter Millar and Gianvito Rossi in particular showing “solid momentum.” At Watchfinder & Co., Richemont’s platform for pre-owned watches, sales grew in the double digits.
All geographic regions were up, with the Middle East and Africa, and Japan, delivering growth of 20 percent and 17 percent, respectively. The Americas rose 14 percent, followed by Europe, which climbed 8 percent in the three-month period.
Asia-Pacific, which began showing signs of recovery in Richemont’s first fiscal half, rose 6 percent, although at actual rates sales were down 2 percent. Richemont said sales in China, Hong Kong and Macao combined were up by 2 percent, mostly led by “solid activity” in Hong Kong.
According to Citi’s calculations, China was down by a midsingle-digit percentage against tough comparisons with the corresponding period last year. The bank also flagged an “improved quality of demand” in key Chinese cities and among higher-end clients.
Bernstein’s Luca Solca said the team recently spent a few days “on the ground in Hong Kong,” and observed that while the Chinese consumer may be showing positive signs, “the path to recovery remains unsteady. Chinese luxury consumers have become more discerning; the quality of demand has changed.”
Growth was robust elsewhere in Asia-Pacific, with Richemont flagging “noteworthy performances” in the South Korean and Australian markets.
Richemont said Japan’s 17 percent growth was primarily driven by the jewelry brands. Local demand in the market remained strong, with tourist spending overall also contributing to growth.
But is Richemont’s boom down to the green shoots of a luxury revival, or rather to the flourishing watches and jewelry category — and the group’s own wise marketing and management?
Tedford-Jones from Global Data noted that Richemont’s performance “contrasts with the broader slowdown affecting luxury fashion and more aspirational segments. The group’s jewelry-heavy portfolio has proven more resilient than apparel-led businesses, a dynamic that may have implications for other major luxury conglomerates.”
Platinum, emeralds, rubies, onyx, yellow diamonds, diamonds from the Van Cleef & Arpels Collection. Courtesy of Van Cleef & Arpels
Solca believes that Richemont is poised to reap even more rewards, due to its reliance on jewelry, and its well-plotted strategies, arguing the group has a rare ability to “navigate a polarized social environment and keep both aspirational and high-end consumers under the same roof.”
Striking that balance is a holy grail for the big luxury groups, which have been scrambling to lower their entry prices to attract aspirational consumers alienated by the spiraling cost of luxury goods, post-pandemic.
Drawing on his recent trip to Hong Kong, Solca added that Richemont also has the ability to navigate new consumer trends.
He said that luxury brands in the region “may no longer rely on a steady stream of newly minted luxury consumers to drive growth in the region and must bridge a K-shaped economy elsewhere. In that context, we believe jewelry offers attractive price depth compared to other categories, and that the category’s appeal will continue to grow. Richemont stands at the top of the jewelry pecking order and is well-positioned to meet this structural shift.”
In a note he called “Crazy Little Thing Called Love,” Erwan Rambourg of HSBC said the markets should prepare for more growth at Richemont, and the jewelry category in particular.
“Many investors have picked up firsthand that the success of Cartier’s Love Unlimited range has been such that it could well be nicknamed Love Limited — given it’s out of stock everywhere we have been. [But that] is just one of the many Cartier and Van Cleef success stories,” in the third quarter, he wrote.
“We see a form of pent-up demand continuing to feed into jewelry sales growth for the next 12 to 15 months regardless of some investor fears about a pickup in handbag sales clouding the outlook for jewelry. We do not believe in an either/or scenario as purchasing patterns are very different in both luxury verticals,” Rambourg added.
The markets shrugged off Richemont’s quarterly growth, sending the share price down 2.4 percent to close at 170.55 Swiss francs on Thursday.