Richemont Reports Slower Growth in Key Holiday Period
Richemont’s share price soared on Thursday after third-quarter sales beat analysts’ estimates and the company confirmed its intention to sell all or part of Yoox Net-a-porter within the next 12 months.
In a trading update, Compagnie Financière Richemont said sales in the third fiscal quarter, which runs from October through December, rose 4 percent at actual exchange rates to 5.6 billion euros, bolstered by strong demand for jewelry in markets such as Japan, mainland China and — surprisingly — North America.
More from WWD
At constant exchange, growth was 8 percent in the three-month period. Jefferies described performance in the quarter as “resilient,” while Barclays referred to it as “solid.” Bernstein’s Luca Solca said the numbers “comfortably” beat expectations, as he reiterated the firm’s outperform rating on the stock.
“Richemont delivered a very reassuring set of results,” Solca wrote, adding that the fourth quarter was also looking bright, with sales growth accelerating.
Still, Richemont is not immune to the luxury slowdown. Overall, growth in the third quarter was slower than in the first six months of the year, when Richemont saw revenue climb 6 percent at actual rates and 12 percent at constant ones.
The group, which owns brands including Cartier, Chloé and Van Cleef & Arpels, acknowledged the difficult backdrop and said the results were achieved despite “a continued uncertain macroeconomic and geopolitical environment.”
Jewelry was the only category to post gains at actual rates. Revenue grew 6 percent to nearly 4 billion euros, while the specialist watchmakers and other divisions saw their sales decline by 1 percent and 4 percent, respectively.
By region, Japan and Asia Pacific each grew by 8 percent at actual rates, helped by favorable comparisons with the corresponding period last year, currency tailwinds, and a 25 percent uptick in mainland China.
The Americas region grew by 3 percent, while Europe declined by 4 percent. Richemont said sales in the Americas were boosted by a “resilient economy,” and added that locals had chosen to make their holiday purchases at home rather than in Europe.
The Americas bounce was a surprise as high-end fashion and luxury brands, including Burberry, have been reporting waning demand in the region as aspirational customers snap their wallets shut.
The decline in luxury demand isn’t limited to the U.S. On Thursday, the high-end retailer Watches of Switzerland issued a revenue and profit warning in the wake of lackluster holiday sales. The move sent the shares down 37 percent to 3.71 pounds on the London Stock Exchange Thursday.
By contrast, Richemont’s chief financial officer Burkhart Grund said Cartier’s SoHo New York store was a top performer in the third quarter, as was the group’s newest jewelry brand, Buccellati.
“The U.S. consumer is healthy, and there’s a feel-good factor,” in the region, said Grund, adding that Richemont has seen a “sequential acceleration” in North American demand since the start of the year.
While he was upbeat on the U.S., Grund was cautious about the outlook generally, saying that Richemont was facing “challenging” comparisons in the fourth quarter amid ongoing volatility in the international markets.
He said it was difficult to take anything but a short-term view on trading in 2024. “There are too many moving parts, and as a result, our outlook is very short term,” he said.
Despite that fog, there’s a “subdued optimism” at Richemont, which believes in the value of its brands. “That brand equity will see us through,” challenging times, he said.
Richemont also updated the markets on its plans for Yoox Net-a-porter following the collapse of its deal to sell the retailer to Farfetch and Alabbar.
As reported, Coupang purchased the troubled Farfetch shortly before Christmas when the YNAP deal was to have been finalized. Richemont called off the sale shortly afterward, and said it was considering its options with regard to YNAP.
On Thursday, Grund confirmed that plans are in the works to find a “new, controlling shareholder for YNAP” and that Richemont was even willing to sell 100 percent of the company. He added that Richemont has already received “unsolicited interest” from a number of parties.
Management, he said, “sees a reasonable chance” that YNAP will be sold within the next 12 months. On Richemont’s website, the online retail group is classified as “held for sale.”
In the third quarter, Richemont said sales at YNAP were down 14 percent at actual rates and 11 percent at constant exchange in what the luxury giant described as “a continued challenging environment for pure play online distributors.”
Industry sources said that Net-a-porter is already tightening its belt and buying only brands with 80 percent sell-throughs, or more. The company declined to comment.
Richemont said its net cash position improved to 6.8 billion euros in the quarter, which reflected “solid trading performance” as well as proceeds from the exercise of warrants under the 2020 shareholder loyalty program.
Shares in Richemont climbed steadily throughout the day on Thursday. The shares closed up more than 11 percent at 117.20 Swiss francs on Thursday.
Best of WWD
