Richemont’s China growth now runs through Hong Kong, Macau

What happened Richemont, the Swiss owner of Cartier and Van Cleef & Arpels, reported first-half sales of 12.3 billion euros ($13.6 billion) on November 13, up 17% YoY at constant exchange rates for the six months to September 30. Operating profit rose 33% (38% at constant rates) to 3.1 billion euros ($3.5 billion). That included 229 million euros ($253 million) of one-time tariff-related gains. Chief Financial Officer Burkhart Grund said on the earnings call that he does not expect further tariff refunds in the second half, according to a transcript published by Investing.com. Cartier and Van Cleef & Arpels drive Richemont’s jewelry sales Jewelry did most of the work. Sales at the group’s four jewelry houses (Buccellati, Cartier, Van Cleef & Arpels, and Vhernier) rose 19% at constant rates to 9.1 billion euros ($10.1 billion), roughly three-quarters of group revenue. Growth eased to 14% in the second quarter, against a 17% comparison a year earlier. The specialist watchmakers grew 10%. By region, the Americas climbed 23% and Japan 30% at constant rates. Asia-Pacific grew 16% and remained the largest region at 33% of sales, while the Middle East and Africa slipped 2% as conflict in the region cut tourist spending. Second-quarter sales of 5.95 billion euros ($6.6 billion) beat a Visible Alpha consensus of 5.89 billion euros ($6.5 billion), Reuters reported. Shares nonetheless fell more than 6% in early Zurich trading before paring losses to 4.8% by late morning. The Jing Take Richemont reports China, Hong Kong, and Macau as a single figure, and on that basis the half looks respectable, with sales up 7%. The split beneath it is less comfortable. Chief Executive Nicolas Bos said on the call that mainland sales fell 3%, offset by “very high double-digit growth” in Hong Kong and Macau. Momentum is also fading. Combined sales in the three markets grew by double digits in the first quarter, Richemont said in July. In the second quarter, the company reported only a modest increase and said the mainland remained weak. That came against a tougher base, since the same markets had grown 7% in the second quarter of the previous year. Hong Kong and Macau sales offset Richemont’s mainland China decline Hong Kong and Macau are now carrying Richemont’s China business. The group does not disclose figures for either market, so it is not possible to say how much of that growth came from mainland visitors and how much from local clients. Elsewhere in the region, South Korea and Taiwan posted double-digit gains, which helps explain how Asia-Pacific grew 16% even as the mainland shrank. Japan, which Richemont reports as a separate region, owed its growth mainly to the group’s long-standing domestic clientele rather than tourists, according to Bos. Jewelry outpaces watches and fashion in China luxury retail Category matters too. In Asia-Pacific, sales at the jewelry houses rose by double digits, while watch sales were broadly stable as soft demand in China offset growth elsewhere in the region. China has also weighed on fashion: at LVMH, fashion and leather goods sales fell 5% organically in the July-to-September quarter as reduced demand in China offset strength in the US. Richemont’s store moves follow the same lines. Two of its jewelry houses expanded on the mainland during the half, with Buccellati opening in Guangzhou and Vhernier opening its first boutiques in China. On the fashion side, the group closed some Dunhill stores in China and relocated Delvaux boutiques in Hong Kong and Shanghai. Asked about store closures in mainland China, Chairman Johann Rupert said shutting a store did not mean retreating from a country. Richemont gives no China forecast ahead of Golden Week update None of this amounts to a forecast, and management offered none. Asked whether China’s slowdown was cyclical or structural, Rupert said: “China will come back. When? We do not know.” Grund added that gold prices in the half were roughly 40% higher YoY, and that their recent fall from a peak has yet to reach the income statement. The next test arrives with Richemont’s trading update for the quarter to December 31, which covers Golden Week and the year-end gifting season. The question is whether Hong Kong and Macau can keep compensating for a mainland market that, for Richemont at least, is still contracting. After the group’s annual results in May, Jing Daily examined what homegrown jeweler Laopu Gold (老铺黄金) signals for Richemont’s future in China. The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

Richemont’s China growth now runs through Hong Kong, Macau

TUMI’s new growth playbook: From travel expertise to lifestyle performance

Upgrade to Pro

Sectors

Insights

Company

Richemont’s China growth now runs through Hong Kong, Macau

TUMI’s new growth playbook: From travel expertise to lifestyle performance