Shares fell almost 4 per cent in early trading on Friday (Nov 8), giving it a market capitalisation of about SFr68bn. The group has gained 6 per cent so far this year as investors have bet on the ongoing strength of its jewellery brands, particularly Cartier.
Richemont’s results come at the end of a challenging quarter for the luxury sector. Sales at the world’s biggest luxury group LVMH undershot expectations due to ongoing weakness in China, while struggling Gucci owner Kering warned that its full-year operating income would drop by almost half compared with 2023 levels. Hermès has continued to outperform, however.
The pullback in spending by Chinese customers has hit many consumer groups, with brewers Carlsberg and AB InBev and beauty groups Estée Lauder and L’Oréal all flagging a sales slump in the world’s second-largest economy this quarter.
Richemont’s operating profits for the first six months of the year fell 17 per cent compared with the previous year to €2.2 billion, missing expectations. The group also took a €1.2 billion non-cash writedown as part of a deal to sell its lossmaking Yoox Net-a-Porter online retail business to German ecommerce group Mytheresa.
Jewellery, Richemont’s biggest and most closely watched division, has diverged from its watchmaking division, its second biggest, in recent quarters.
“Jewellery maisons — responsible for the bulk of group profits — produced a resilient performance . . . but specialist watchmakers ended up materially worse than expected,” said Luca Solca, an analyst at Bernstein.
Richemont has undergone a sweeping leadership overhaul in recent months as it seeks to streamline succession planning and decision-making at the group controlled by Rupert.
Bos, who previously headed Van Cleef & Arpels, became group chief executive in an expanded version of the role in June while the following month the company announced new chief executives at Cartier and Van Cleef & Arpels, with Louis Ferla replacing Cyrille Vigneron as chief executive of Cartier after eight years.
“The management change and jewellery resilience are clear positives, but macro remains tricky to navigate in the short term,” analysts at HSBC wrote ahead of the results. Since Bos’s appointment, “investors have stopped asking about succession planning [and] we remain optimistic about the long-term compounding growth nature of Cartier”.
Adrienne Klasa © 2024 The Financial Times
This article originally appeared in The Financial Times