Richemont sees tough trading after quarterly sales dip
The situation in Hong Kong, the top market for Swiss watches, has been difficult for some time, as political tensions, China’s slowing economy and a strong Hong Kong dollar have discouraged mainland tourists. Swiss watch exports to Hong Kong were down 28 percent in November.
Sales to tourists in Europe had provided some relief, but this changed when Islamists killed 130 people in Paris on Nov. 13, prompting many people to revise their travel plans.
Sales at Richemont fell 4 percent at constant exchange rates to 2.9 billion euros ($3.2 billion) in the three months to December, in line with forecasts in a Reuters poll, their first fall in the important Christmas quarter since 2008. They were up 3 percent in reported terms.
“The challenging trading environment is likely to prevail in the final quarter to 31 March 2016,” the world’s second biggest luxury goods group said in a statement on Thursday.
“In Europe, the decline … began in November and primarily reflects lower levels of tourism in the region,” Richemont said.
Sales in Europe took a sudden turndown, falling 3 percent in the latest quarter from the same period a year ago while sales in Asia Pacific declined 9 percent.
Also on Thursday, British fashion brand Burberry posted a 1 percent rise in third-quarter sales buoyed by growth in China but said the outlook for the luxury sector remained uncertain.
Richemont, which also makes IWC and Jaeger-LeCoultre watches, said that while Hong Kong and Macau both reported significantly lower sales, the rate of sales growth continued to improve in mainland China.
“While clearly a fragile environment for luxury, Richemont says that mainland China continues to improve — that is the clear positive for me today,” Kepler Cheuvreux analyst Jon Cox said.
After opening higher, Richemont shares fell 1.7 percent to 64.30 Swiss francs at 0835 GMT.
They have fallen more than 9 percent so far this year, on top of a 19 percent decline last year. They are trading at just over 21 times forward earnings, at a considerable premium to Swatch Group and LVMH. ($1 = 0.9197 euros)
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