Jewelry Maisons, online retail, and the Asia Pacific partially offset sales declines in other areas for the Swiss luxury group Richemont this year to March, but the pandemic took its toll. All regions declined except the Asia Pacific, where Mainland China generated strong, triple-digit growth and is now the company’s number one market.
The owner of Cartier, Dunhill, and Montblanc saw sales slip by 5 percent at constant exchange rates to $16 billion (€13.1 billion), with Europe and Japan most affected, down by 30 percent and 21 percent, respectively. However, net profit soared by 38 percent to $1.58 billion (€1.3 billion), and shares jumped 5 percent by 3 pm (CET) Thursday.
In sharp contrast to conditions in the rest of the world, sales in the Asia Pacific — where the pandemic started — jumped by 22 percent. There were three consecutive quarters of growth, the last of which drove a 106-percent increase. Over the year, the appetite for both jewelry and watches in Mainland China led to a triple-digit sales rise which more than offset tourist-deprived shopping hotspots like Hong Kong and South Korea.
The opening of Tmall Luxury Pavilion flagship stores for Montblanc, Chloé, and Dunhill and the re-launch of the Peter Millar e-commerce platform also helped Richemont’s fashion and accessories business grow in the region.
To date, Richemont’s partnership with Alibaba has led to 11 of its stores going live on the Tmall Luxury Pavilion. The others are Cartier, Van Cleef & Arpels, IWC Schaffhausen, Jaeger-LeCoultre, Panerai, Piaget & Vacheron Constantin, and Net-A-Porter.
It has been Asia’s year
As a result of the strong performance, the Asia Pacific share of sales has cranked up substantially from 35 percent in the fiscal year 2020 to 45 percent in 2021. Mainland China “benefited from the repatriation of previous outbound tourist demand and increased domestic spending,” noted Richemont. Hainan is a good example of that.
Among Richemont’s categories, its already powerful jewelry Maisons have increased their share from just over 50 percent in the fiscal year 2019 to 57 percent in 2021. Jewelry was the only segment to grow during the pandemic (7 percent at constant rates). Meanwhile, the specialist watchmaker division — including IWC, Jaeger Lecoultre, and Vacheron Constantin, among others — slipped by 19 percent.
Despite this drop, Richemont chairman Johann Rupert believes that specialist watchmakers are in good shape. “Their recovery accelerated from the third quarter, with the first four months of the calendar year trading above 2019 levels, when corrected for a significant stock rebalancing,” he stated. Additionally, participation in Watches & Wonders fairs in Shanghai and Sanya supported the division’s double-digit sales increase in the Asia Pacific.
Richemont’s overall fourth-quarter rebound has been strong at 36 percent, with growth returning to all segments, including online distributors like Net-A-Porter, Mr Porter, Yoox, The Outnet, and Watchfinder & Co.
“Online, mobile, and distant shopping has proven to be key growth drivers, and we have seen a sharp increase in clients favoring those channels,” said Rupert. As a result, Richemont has accelerated its digital transformation via the ‘Luxury New Retail’ business model to provide a better route-to-market for its brands.
Yoox and Net-A-Porter are transitioning to hybrid models to complement their wholesale offer in partnership with over 1,000 luxury labels. Yoox will also add a marketplace by the beginning of 2022, thereby expanding its brand offering and adding new categories.
Richemont says its YNAP joint ventures in China with Alibaba and in the Middle East with Symphony have been particularly successful, doubling in China and growing by double digits in the Middle East. YNAP is expected to continue its localization plans with more than 15 countries earmarked for this year.
Rupert commented: “Our ‘Luxury New Retail’ developments in Mainland China are providing the incubator of our future luxury retail model, where customer shopping journeys will benefit from a seamless online/offline experience.”