Richemont shows up Apple in China

Here’s a different take on the China problem: weak Apple iPhone sales in late 2018 did not presage an Asia-led global downturn. Canny Chinese consumers instead bought jewellery and traditional watches.

Swiss luxury group Richemont reports its mainland China units grew sales at a double-digit pace in 2018’s final quarter after “high single-digit” expansion in the six months to September. Take that, Apple.

The US group this month blamed economic weakness in China for a revenue warning. Richemont’s riposte strengthened the case that China’s slowdown has been overdone. Sparklier jewellery sales in mainland China offset gloomier news from Europe, especially France.

The Paris fashion is for “high-vis” yellow vests, not discreet Cartier watches. Street protests closed shops on six Saturdays. Overall, sales slowed less than expected.

Even so, Richemont’s share price remains 25% down on a year ago.

Do not expect Richemont to rebound quickly, however. This recent Chinese surge reflected purchase repatriation. Mainland tourists skipped shopping trips to France but bought watches at home. A weaker renminbi meant lower tourist spending in the large Hong Kong market. Sales displaced are not sales gained.

Ultimately Swiss watchmakers will not escape any Asian downturn. They may bristle at the suggestion that an Apple watch compares with traditional mechanical masterpieces, let alone an iPhone. A smartphone is ephemeral, whereas jewellery accrues value. Prices reflect the cost of precious metals and stones as well as craftsmanship and branding. But the propensity to spend is what counts.

Richemont sales growth in the Asia-Pacific region will slow significantly in the next financial year, analysts believe. Shiny stones and iPhones are maybe not so different. /London. January 12