The Swiss luxury group Richemont, known for its prestigious brands like Cartier and Vacheron Constantin, has reported a notable decline in its sales, particularly in the key market of China. The company’s six-month sales fell by one percent overall, with sales in China, Hong Kong, and Macau plummeting by an alarming 27 percent from the previous year. This downturn signals a troubling trend that could impact the luxury sector further.
One of the main culprits behind this decline appears to be the slow recovery from the COVID-19 pandemic in China. As Richemont CEO Nicolas Bos pointed out, consumer confidence is at an all-time low, causing a significant impact on luxury purchases. “The confidence factor is probably the most important; it is maybe at an all-time low. We have no clue how long it will last and don’t know if we’ve reached the bottom or not,” Bos explained. The uncertainty surrounding economic recovery makes consumers wary of spending on luxury items, which often require significant investment.
Although Richemont faced challenges in China, other regions displayed resilience. Interestingly, sales in Japan soared by 42 percent at constant exchange rates, while the Americas experienced an 11 percent increase—10 percentage points more than competitor LVMH. The European market also reported a 4 percent rise, and the Middle East and Africa posted an 11 percent gain. This geographical disparity indicates that while demand is waning in China, it may be growing elsewhere.
Jewellery remains a robust segment for Richemont, showcasing a 2 percent increase in revenue, buoyed by strong performances from brands like Cartier and Van Cleef & Arpels. These brands continue to resonate with consumers despite broader market challenges. In stark contrast, the watch segment witnessed a staggering 17 percent drop, attributed mainly to reduced demand in China. Bos noted, “We see far better demand in the rest of the world, especially on the high end.” This suggests that while certain luxury products may struggle, there is still ample opportunity on the global stage.
Richemont’s fashion and accessories division recorded a modest growth of 2 percent, supported by rising sales at Alaïa and Peter Millar. However, the division also reported an operating loss of €23 million, reflecting varied performances across brands and ongoing investments to enhance desirability and visibility. The arrival of new designer Chemena Kamali brought a fresh perspective with two well-received collections targeting a modern yet feminine aesthetic. Nevertheless, sales have yet to show significant recovery, emphasizing the need for strategic repositioning.
In terms of financial health, Richemont’s overall performance suffered from a €1.3 billion loss attributed to discontinued operations, mainly due to the write-down of its e-commerce unit, Yoox Net-a-Porter (YNAP). This unit will require recapitalization before its anticipated sale to MyTheresa. Such financial maneuvers illustrate the growing pains companies face as they navigate the complex landscape of luxury retail in a post-pandemic world.
Richemont is not alone in facing these challenges. Its competitor, Kering SA, which owns Gucci, recently saw its stock plunge to a seven-year low due to similar fears of weak demand in China. Analysts have reacted sharply, downgrading their forecasts amid concerns that the entire luxury sector is experiencing headwinds as consumer spending patterns change in response to economic uncertainties.
In conclusion, Richemont’s latest sales figures highlight pressing challenges in the luxury sector, particularly in China. As consumer confidence wanes, companies need to strategize carefully to maintain brand vitality. While certain markets demonstrate resilience, the overall landscape remains tumultuous as luxury brands adapt to shifting consumer behaviors and economic conditions.
