Jewellery the star
This week I also pick Richemont, which I’ve been bullish on since October last year. After a tough 2016, Richemont reported better-than-expected numbers for the Christmas quarter, with growth driven by jewellery sales across most regions, as well as retail watch sales. It reported growth in Europe, Asia Pacific and the Americas. However, its wholesale sales declined by 3% year-on-year in the quarter.
The group, which owns luxury brands like Cartier, Van Cleef & Arpels, Piaget, Chloé, Alfred Dunhill and Montblanc, earned the bulk of its sales from its jewellery business, which accounted for 56% of overall sales, while Asia Pacific, with 36.5%, was the geographical area with the biggest contribution to sales. Sales in this region increased by 9%, reflecting “strong performances in mainland China and Korea, mitigated by continued declines in Hong Kong and Macau”, Richemont said.
Other businesses also posted good growth, driven mainly by Chloé, Montblanc and Peter Millar, the group said. Looking at the nine-month period to end December, sales declined by 7% at actual exchange rates. The group will announce its results for the year on 12 May. How to trade it: In October last year I had recommended a long on Richemont at 9 080c/share – it had corrected from an overextended position losing about 35% of its value from highs at 12 175c/share to a low at 7 845c/share. Last week it gapped upwards on the unexpected good news, and because gaps are usually closed I expect a pullback to 9 735c/share – before Richemont resumes a sustainable uptrend towards 11 315c/share. Increase longs above that level as gains to 12 175c/share should then follow. At present, investors should wait for the near-term correction before going long. Thereafter, any level above 9 080c/share or above 9 735c/ share would make a good buying opportunity with a reasonable stop-loss.
Asia Pacific with 36.5%, was the geographical area with the biggest contribution to sales.