LONDON — Compagnie Financière Richemont shares recouped some ground on Tuesday after a bruising day in the public markets following the release of its fiscal first-quarter results.
The shares were up 2 percent at 140.85 Swiss francs on the SIX Swiss Exchange in mid-afternoon trading. They continued to climb during the day and closed up 2.7 percent at 141.55 Swiss francs.
On Monday, shares in Richemont closed down more than 10 percent at 137.90 Swiss francs after the luxury goods giant reported a 2 percent contraction in sales in the key Americas region, and a miss on projections in Asia Pacific.
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As reported, the parent of brands including Cartier, Buccellati, Chloe and IWC saw sales in APAC climb 40 percent, while Royal Bank of Canada had been anticipating a 41 percent gain.
The Richemont share price rebound followed a call with analysts during which the company offered further details about trading in the three months to June 30, and talked about what the future might hold in the U.S. and China.
Bernstein’s Luca Solca, who was present on the analyst call, wrote in a report that Richemont management’s outlook for fiscal 2023-24 was “somewhat tempered” due to potential volatility from the forthcoming U.S. elections.
On the call, Richemont also brought up concerns about the Chinese macro economy “that could impact both high-end and aspirational consumers.”
As reported earlier this week, China’s second-quarter GDP missed analysts’ estimates of 7.3 percent. Growth was 0.8 percent compared with the previous quarter, slower than the 2.2 percent quarterly growth rate seen in the first three months of the year.
“Households are wary of spending, consumers remain skeptical about the recovery, and expectations relating to employment and income gains have turned negative,” Moody’s Analytics wrote in a research note following the GDP announcement.
In his report, Solca wrote that Richemont does not foresee a return of Chinese tour groups to Europe this summer due to ongoing travel restrictions imposed by Chinese authorities.
Solca also noted that despite the 2 percent decline in the U.S., Richemont is confident about its prospects in the region, with direct-to-consumer and retail sales underpinning the business.
In the three-month period, the West Coast experienced the worst performance, “possibly related to significant layoffs in the tech sector,” according to Solca, while the East Coast proved “more resilient — particularly New York City, which saw positive results.”
Richemont management emphasized that the labor market in the U.S. remains strong while there is hope for a “smooth transition” after the latest interest rate hike, according to Solca.
“The upcoming presidential election in November 2024 typically impacts luxury sales negatively, but a rally is expected post-election,” Solca’s added.