Protests in France weigh on Richemont’s year-end sales

Cartier owner’s in­vestors are wor­ried that Chi­nese ap­petite for lux­ury items could wane as its econ­omy slows

The Gulf Today - Business - - INTERNATIONAL -

PARIS: Cartier owner Richemont said ‘yel­low vest’ protests in France weighed on its sales at the end of 2018, but sig­nalled healthy mo­men­tum within China that could bode well for some lux­ury goods ri­vals.

In­vestors are on edge over wor­ries that Chi­nese ap­petite for big-ticket items could wane as its econ­omy slows, par­tic­u­larly af­ter an Ap­ple warn­ing last week over weaker iphone sales in the coun­try.

Fur­ther cloud­ing the pic­ture is a shift in spend­ing pat­terns as Chi­nese con­sumers, squeezed by a fall­ing yuan, start spend­ing more at home, cre­at­ing uncer­tainty for over­seas tourist hotspots or shop­ping des­ti­na­tions.

Switzer­land’s Richemont, the world’s sec­ond big­gest lux­ury goods group, said sales growth had slowed in the three months to Dec. 31 in Hong Kong, for in­stance, the big­gest mar­ket in the world for watches.

That came on top of prob­lems in France, where a back­lash over high liv­ing costs led to ri­ots in Paris, which ac­cord­ing to Richemont “neg­a­tively im­pacted tourism and led to store clo­sures for six con­sec­u­tive Satur­days”.

French com­pa­nies have this week re­vealed some 60 mil­lion eu­ros ($69 mil­lion) of lost busi­ness from the anti-gov­ern­ment demon­stra­tions.

But Richemont - which also makes Van Cleef & Ar­pels jew­ellery, and owns IWC watches and fash­ion brand Chloe - sig­nalled sales were still pro­gress­ing at a healthy pace in main­land China, cit­ing “dou­ble digit” growth there.

Chi­nese shop­pers at home and abroad ac­count for over a third of sales in the lux­ury in­dus­try as a whole, and com­pa­nies are shak­ing up their ap­proach to cor­ner that clien­tele, ar­gu­ing that in the longterm de­mand will stay strong.

Richemont said in Oc­to­ber it was part­ner­ing with China’s e-com­merce gi­ant Alibaba to shore up sales there, and as part of a push to sell more on­line.

Richemont shares, down over 30 per cent since hit­ting a peak last May when wor­ries over a Uschina trade war be­gan to emerge, were up 2.9 per cent.

Shares in peers in­clud­ing Louis Vuit­ton owner LVMH , which re­ports re­sults on Jan. 29, and Gucci par­ent Ker­ing also ral­lied.

Over­all, Richemont posted a 5 per cent rise in sales at con­stant cur­ren­cies in the Oc­to­berde­cem­ber pe­riod, its third quar­ter, ex­clud­ing re­cently ac­quired on­line dis­trib­u­tors Yoox Net-aporter (YNAP) and Watchfinder, a sec­ond-hand plat­form.

That marked a slight slow­down from the 8 per cent growth in the six months to end-septem­ber, though it was in line with con­sen­sus es­ti­mates cited by an­a­lysts.

“Sales grew in all re­gions, with the ex­cep­tion of the Mid­dle East and Eu­rope,” Richemont said. It gave no out­look.

In­clud­ing YNAP and Watchfinder, Richemont’s sales were up 24 per cent at con­stant cur­ren­cies, in line with ex­pec­ta­tions.

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