Chinese tourists help lift Richemont sales forecast
by Brenna Hughes Neghaiwi,
2015-09-17 07:47:48.0
ZURICH — While economic growth may be cooling at home, wealthy Chinese tourists are still snapping up expensive watches and jewellery on their travels, helping Swiss luxury goods group Richemont to beat sales forecasts.
The maker of Cartier watches said on Wednesday that sales increased 4% at constant currencies in the five months to last month, twice as much as even the most optimistic forecast in a Reuters poll of analysts.
Sales leapt 28% in Europe and 48% in Japan, driven mainly by spending from Chinese travellers, more than offsetting an 18% decline in the Asia-Pacific as well as weakness in the Americas and Middle East.
Luxury goods stocks have been hit hard by a slowing Chinese economy, as well as a crackdown in the country on conspicuous consumption.
A recent devaluation in the yuan has also raised concerns about a possible dip in tourism.
So following the strong results, Richemont shares jumped as much as 7.6% to an intraday high of R107.10 on the JSE on Wednesday.
As the first luxury goods group to post results for July and last month, its performance also helped to lift rival stocks such as Hermes, Swatch and Louis Vuitton Moët Hennessy (LVMH) between 3% and 6%.
"We already have some confirmation here in Switzerland, but we did not know that for all of Europe, July and August were very much driven by Chinese tourism," Vontobel analyst Rene Weber said.
The CEO of Swiss watchmaker Swatch, Nick Hayek, had already cited strong sales to Chinese customers.
Richemont, the world’s second-biggest luxury group by sales behind LVMH, makes about 38% of its revenues in Europe, according to Vontobel analysts, which they said put it in a good position to capitalise on improving demand on that continent.
US jeweller Tiffany, with 12% exposure to Europe, last month forecast a surprise earnings decline after a strong dollar and new product costs contributed to a drop in quarterly earnings.
Richemont said it had returned to growth in China, including a double-digit percentage rise in sales at its stores, though sales in Hong Kong and Macau remained down on the past financial year. "The results highlighted the strength of Richemont in the jewellery product category," said Bernstein analyst Mario Ortelli.
Reuters
A pedestrian walks past a Cartier store, operated by Richemont, as it stands illuminated at night in Shanghai, China. Picture: BLOOMBERG
ZURICH — While economic growth may be cooling at home, wealthy Chinese tourists are still snapping up expensive watches and jewellery on their travels, helping Swiss luxury goods group Richemont to beat sales forecasts.
The maker of Cartier watches said on Wednesday that sales increased 4% at constant currencies in the five months to last month, twice as much as even the most optimistic forecast in a Reuters poll of analysts.
Sales leapt 28% in Europe and 48% in Japan, driven mainly by spending from Chinese travellers, more than offsetting an 18% decline in the Asia-Pacific as well as weakness in the Americas and Middle East.
Luxury goods stocks have been hit hard by a slowing Chinese economy, as well as a crackdown in the country on conspicuous consumption.
A recent devaluation in the yuan has also raised concerns about a possible dip in tourism.
So following the strong results, Richemont shares jumped as much as 7.6% to an intraday high of R107.10 on the JSE on Wednesday.
As the first luxury goods group to post results for July and last month, its performance also helped to lift rival stocks such as Hermes, Swatch and Louis Vuitton Moët Hennessy (LVMH) between 3% and 6%.
"We already have some confirmation here in Switzerland, but we did not know that for all of Europe, July and August were very much driven by Chinese tourism," Vontobel analyst Rene Weber said.
The CEO of Swiss watchmaker Swatch, Nick Hayek, had already cited strong sales to Chinese customers.
Richemont, the world’s second-biggest luxury group by sales behind LVMH, makes about 38% of its revenues in Europe, according to Vontobel analysts, which they said put it in a good position to capitalise on improving demand on that continent.
US jeweller Tiffany, with 12% exposure to Europe, last month forecast a surprise earnings decline after a strong dollar and new product costs contributed to a drop in quarterly earnings.
Richemont said it had returned to growth in China, including a double-digit percentage rise in sales at its stores, though sales in Hong Kong and Macau remained down on the past financial year. "The results highlighted the strength of Richemont in the jewellery product category," said Bernstein analyst Mario Ortelli.
Reuters
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