LONDON — Investors hoping for a speedy return to luxury sales growth in China will have to take a deep breath — and the long view — especially if they’re buying shares in Compagnie Financière Richemont.
On Monday, as Salon International de la Haute Horlogerie — the biggest luxury watch fair — unfolded in Geneva, the parent of brands including Cartier and IWC said sales in the third quarter climbed 9.3 percent to 2.86 billion euros, or $3.72 billion, boosted partly by favorable exchange rates.
The figure fell short of analysts’ estimates, and compares with sales growth of 21 percent in the first six months of the 2012-13 fiscal year, and 24 percent in the third quarter of last year.
Sales in the Asia-Pacific region, meanwhile, were flat year-on-year on a constant currency basis. The news pushed Richemont’s stock price down 5.6 percent to 74.30 Swiss francs, or $79.45.
In its third-quarter trading update, Richemont said it was still “unclear” how business patterns in Asia, which has notched double-digit growth over the past year, would evolve in the short term.
At actual exchange rates, sales in Asia rose 6.2 percent to 1.12 billion euros, or $1.46 billion in the three months to Dec. 31.
All euro figures have been converted to dollars at average exchange rates for the periods to which they refer.
“Following several years of exceptional growth in the Asia-Pacific region, in particular China, sales were flat compared to the demanding comparative figures for the same quarter last year,” the statement said, adding that the company takes a “long-term view” in managing its business, and would continue to invest in its brands.
Analysts pegged the Asian slowdown on a variety of issues, including a later start to the Chinese New Year — which begins on Feb. 10, compared with Jan. 23 last year — and softer wholesale sales in the region, especially of watches.
Antoine Belge, head of consumer brands and retail equity research, Europe, at HSBC in Paris, said Richemont’s news was a wake-up call for overeager investors.
“If you look at Richemont’s stock price, it has risen 30 percent over the past three months,” he said. “Today’s fall in the stock price is wake-up call that there is no improvement in China yet. People got excited about the Chinese elections, and they expected improvements overnight. But the new government is not yet in place.”
Thomas Chauvet, a luxury analyst at Citi Global Markets in London, took a similar view in a report published shortly after Richemont released its results on Monday morning.
“While Richemont remains our most preferred long-term investment idea in the luxury sector, we think the market will be disappointed near term,” he wrote, pointing to Richemont’s return to single-digit sales growth, following 11 consecutive quarters of double-digit increases, and the downward trend in Asia.
“The market was expecting an acceleration driven by improved consumer sentiment following the change in Chinese political leadership,” Chauvet added.
Back in November, Richemont had already warned that domestic sales in Asia were slowing down, and the robust double-digit growth rates that the company had consistently seen in the region over the past years were not sustainable.
“Part of that moderation has been self-inflicted,” said Gary Saage, Richemont’s chief financial officer, at the time. “As we grow our retail, we’ve been a bit more cautious on the wholesale side. We don’t want our wholesale partners to be overstocked.”
With regard to watches in particular — which are sold through both wholesale and retail channels — Saage said the wholesale environment in Asia is “not as robust” as it was last year.
On Monday, Richemont reiterated that wholesale sales were “relatively weak,” reflecting a cautious approach by its retail partners in the watch business, and a less favorable retail environment.
The trends in Asia turned quickly: In the first half of this year, sales in the region grew 22 percent. In the third quarter of last year, growth in the region was 36 percent.
Asia wasn’t the only surprise on Monday. There was also an unexpected slowdown at Richemont’s biggest brand, Cartier, which analysts say is most likely due to slowing watch sales.
“[Today’s results] show that jewelry has done exceptionally well, but within Cartier, watches are doing far less well,” said Belge.
In the third quarter, sales at Richemont’s jewelry brands climbed 8 percent at actual exchange rates, and 4 percent at constant currency rates. A year ago, third-quarter sales at the jewelry brands were up 25 percent at both actual and constant rates.
In other Cartier news, the brand has a new managing director for the U.K., Laurent Feniou. Previously a managing director at Rothschild in London, the Belgian national began work at the brand’s Bond Street headquarters last week. He replaces François Le Troquer, who has moved to Paris to work in Cartier’s international retail division.
In other Richemont news, CTF Watch, a subsidiary of Chow Tai Fook Jewellery Group Ltd., has confirmed the formation of a joint venture partnership with the Richemont-owned Baume & Mercier for the distribution of the Swiss brand’s watches in Mainland China.
In a separate report on the joint venture, HSBC’s Belge noted that the deal would have a small impact on both companies.
“Baume & Mercier is the only struggling brand at Richemont, with an access price point positioning similar to Swatch’s Tissot or Longines brands, but clearly not as successful.
“Traditionally, Richemont’s go-to partner for watches in Greater China is Emperor but as B&M is positioned much lower in terms of price points, Chow Tai Fook makes a much more logical partner than Emperor on this, as Emperor is mostly skewed to the high end.”
In the third quarter, Richemont said the Americas showed the most robust sales growth. Sales there grew 18 percent at actual rates. Europe, meanwhile, grew by 11 percent while sales in Japan advanced 3 percent.
In the first nine months, Richemont’s sales climbed 16.7 percent to 7.97 billion euros, or $10.36 billion. Growth in the Asia-Pacific region in the nine months was 16.3 percent at actual exchange rates, and 6 percent at constant exchange rates.
There'll be no rest for those headed to Europe for men's, as Paris just closed the gap with Milan. According to a provisional calendar released by the Chambre Syndicale, Paris Men's Week will now open a day earlier on January 16. See new highlights on the official lineup on WWD.com. #wwdnews #wwdfashion (📷: @kukukuba)
BREAKING: Jonathan Saunders is leaving @DVF. The designer has resigned from his position as chief creative officer of Diane von Furstenberg, the company said in a statement on Friday. At the time of his hire, von Furstenberg said Saunders’ arrival symbolized and facilitated her stepping back from the day-to-day duties that occupy the work of a full-time creative director. The British designer joined DVF in May 2016 and was in charge of all product categories. #wwdnews
For @versace_official’s spring ad campaign, the brand emphasized the archival prints from the spring tribute collection dedicated to the late Gianni Versace. Closing out the show were five of Gianni’s favorite models: Cindy, Naomi, Carla, Helena, and Claudia. Bowing on December 18, the new campaign is yet another tribute to supermodel-dom as the images by Steven Meisel are fronted by @iamnaomicampbell, @cturlington, @gisele and more. #wwdfashion
Four-time Oscar-nominated actress Annette Bening has been waiting 20 years to play Gloria Graham in "Film Stars Don't Die in Liverpool," which will be released on December 29. The movie about Graham – a Hollywood star known for her controversial relationship with a younger Englishman named Peter Turner – is based off a memoir Turned wrote. "She felt vulnerable to him, because she loved him, she really did love him. And anyone that we really truly are in love with, we re vulnerable to in a very deep way," said Bening. Read our full interview with the modern icon of an actress on WWD.com. #wwdeye (📷: @ninebagatelles; Styled by @cristinaehrlich)
The crisp white button down: a staple that can be dressed up or down and accessorized throughout the decades. Here, on a Art Basel-goer in 2017 on the left and on the iconic Audrey Hepburn in “Roman Holiday” in 1953 on the right. #tbt #wwdfashion (📷: Andrew Morales)
Known for her work with @victoriassecret, 25-year-old model @georgiafowler is raising her profile in Hollywood. Fowler stars in @vincecamuto’s holiday campaign, which launched in partnership with “Pitch Perfect 3.” “Almost every shoot with Vince Camuto, I’ve had to face a fear…It was definitely a challenge. I’m so grateful for it, though. I’ve always wanted to be a pop star, so that was the perfect chance,” Fowler said. Head to WWD.com to read about Fowler’s experience modeling, including at the #VSFashionShow, and her relationship with Nick Jonas. #wwdeye (📷: @jilliansollazzo)
EXCLUSIVE: Huda Kattan just became the first beauty influencer to land a major beauty deal. Kattan's business, @hudabeauty, has received a minority investment from private equity firm TSG Consumer Partners. The brand, which industry sources say is on track to do $200 million in retail sales for 2017, will receive support on product, retail and geographic expansion through the deal. Get all the details on the deal and read @_a_collins' interview with Kattan on WWD.com. Link in bio. (📷: @jgreenery) #wwdbeauty #wwdnews
Peruvian model @juanaburga_official – who is known for walking the runways of @rodarte, @viviennewestwood and @torybuch – is making the move to the big screen with drama “Los Últimos.” The film premiered in Argentina in November and arrives in the U.S. and Europe in 2018. On making the switch from modeling to acting, Burga told WWD: “It’s a completely different thing – a lot of people think it’s similar or try to connect things, especially like getting used to the camera or being looked at all the time or playing these different characrers, but film is a completely different story.” #wwdeye (📷: @jgreenery)
London’s newly opened @designmuseum will look back on the life and work of Azzedine Alaïa in a show that the designer helped to curate before he died of heart failure last month. The retrospective, which Alaïa had worked on with Mark Wilson, chief curator of the @groningermuseum, will look at the impact of his work worldwide. The show, “Azzedine Alaïa: The Couturier,” will run from May 10 to October 7. Read more about the exhibit on WWD.com #wwdnews #wwdfashion (📷: @zefashioninsider)