Richemont quarterly sales halve as luxury sector absorbs body blow
Cartier owner offers no financial guidance but says China offers bright spot
Richemont, the Swiss luxury watch and jewellery maker, has said most of its stores outside the US have reopened after Covid-19 lockdowns, but that the business has suffered “unprecedented levels of disruption”.
The Geneva-based company behind Cartier and Van Cleef & Arpels on Thursday said sales had dropped 47 per cent to €1.99bn in the quarter to the end of June, slightly less than the €2.13bn expected by analysts, according to Bloomberg data.
All regions and categories slumped as the global pandemic not only shut Richemont’s stores, but also the warehouses that it uses to fulfil orders on its online multi-brand stores Yoox and Net-a-Porter.
“The lockdowns on the back of the Covid-19 pandemic are causing luxury goods companies to record the worst quarterly results in their history,” said Luca Solca of Bernstein Research.
Richemont’s quarterly report follows similarly dire results from Burberry on Wednesday, and Swatch on Tuesday, which amply illustrated the deep hole that luxury goods makers will have to dig out of if they are to salvage the year. Sector leaders LVMH and Kering report results in the last week of July.
Richemont did not provide any financial guidance, but Johann Rupert, the founder and largest shareholder, warned in May that Covid-19 would cause “grave economic consequences” for up to three years. This fits with what analysts from Bain have predicted, but larger rival LVMH sounded a more optimistic note in April on the prospects for a quick return to normal for high-end purchases.
The only bright spot for Richemont was China where revenue jumped 49 per cent, although the exact revenue figure was not disclosed.
Travel restrictions mean that more Chinese luxury fans are getting their fix in shops on the mainland instead of on summer holidays to Europe. Before the pandemic, Chinese buyers drove most of the sector’s growth, and analysts estimate that they bought anywhere from 50 to 70 per cent of their luxury goods outside the country.
“Chinese consumer appetite is strong. But sales in China are also benefiting from repatriation, while other locations like Europe suffer from the lack of Chinese visitors,” said Luca Solca of Bernstein Research. “So, we need to take good news from China as encouraging, but with a pinch of salt.”
Richemont’s online platforms fared better than its other channels as the pandemic helped accelerate the shift to ecommerce. But even Yoox and Net-a-Porter were hit by disruptions as its main warehouses near Milan, London and New York were closed to protect workers, which meant the company missed out on capturing some sales. Online retail sales in the quarter stood at €506m, down 22 per cent from a year earlier.
Richemont’s online luxury rival Far Fetch was likely to have fared better, said Mr Solca. The London-based company runs a “distributed inventory model”, which means it has no central warehouses, and keeps inventory at the boutique and brand level, meaning “someone was always ready to ship”.
Richemont shares fell roughly 5 per cent in morning trading, taking its decline this year to date to about 19 per cent. The shares have fallen further this year than those of larger rivals LVMH and Kering, which are down 3 per cent and 14.5 per cent respectively.