Richemont’s robust performance driven by Asia Pacific surge

Swiss luxury conglomerate Richemont announced strong performance for the fiscal year ending March 31, 2024, underpinned by significant growth in the Asia Pacific region. The company's sales reached an unprecedented €20.6 billion ($22.3 billion), reflecting a 3% increase at actual exchange rates and an 8% rise at constant exchange rates. Operating profit stood at €4.8 billion ($5.2 billion), showcasing a 13% growth at constant exchange rates, although it experienced a 5% decline at actual exchange rates due to unfavorable currency movements. Richemont’s operating margin was 23.3%, a slight dip from the previous year’s 25.2%. The jewelry maisons, which include Cartier, Van Cleef & Arpels, and Buccellati, were major contributors to this success, delivering a 33.1% operating margin. Sales in this category rose by 6% at actual exchange rates and 12% at constant exchange rates, highlighting robust performance across all regions. Asia Pacific: The growth engine Asia Pacific emerged as a critical growth driver for Richemont, with sales in the region increasing by 4% at actual exchange rates and 10% at constant exchange rates. This growth was primarily driven by a resurgence in consumer activity in mainland China, Hong Kong, and Macau, where sales increased by 7%. The removal of travel and health restrictions early in 2023 significantly boosted these markets. Yet Johann Rupert, Richemont’s chairman, notes that the Asian market remains challenging. “We experienced a softening of sales in the fourth quarter in Asia Pacific against challenging comparatives, which was more than offset by higher growth in all the other regions. As we predicted, a sustainable rebound in Chinese demand would take some time,” he said. The Asia Pacific region now contributes 40% to Richemont’s total sales, plus another 8% for Japan, compared to 22% for the Americas, underscoring Asia’s importance to the group’s overall strategy. According to Rupert, the double-digit sales growth seen in FY 2024 in Asia “validates [Richemont’s] strategic focus on this region,” adding that this focus included expanding the retail network and enhancing customer engagement through direct interactions to capture pent-up post-pandemic demand. Additionally, Richemont’s strategic acquisitions, such as the controlling stake in Gianvito Rossi and the planned acquisition of Vhernier, are set to diversify its portfolio and leverage existing infrastructure for growth. These acquisitions reflect Richemont’s strategy to enhance its product offerings and cater to diverse consumer preferences. Financial outlook Richemont maintains a robust financial position with a net cash position of €7.4 billion ($8 billion), bolstered by a solid increase in cash flow generated from operating activities, which reached €4.7 billion ($5 billion). The company’s focus on maintaining financial discipline has allowed it to navigate the complexities of the global luxury market effectively. Looking ahead, Richemont’s strong foothold in China positions it well for continued growth. The sustained recovery in Chinese consumer spending, coupled with strategic investments in retail and digital platforms, suggests a positive outlook for 2024. However, the company remains cautious about potential challenges such as geopolitical uncertainties and fluctuating currency exchange rates. Rupert appears optimistic about the year ahead and his group’s ability to weather the year ahead, noting that Richemont’s “deliberate focus on local clients across geographies, supported by increased direct client interaction, is contributing to improved resilience.”

Richemont’s robust performance driven by Asia Pacific surge

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Published May 18, 2024

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Richemont’s robust performance driven by Asia Pacific surge