Inside the new Cartier London flagship on New Bond Street

LONDON — France has been counting the cost of the “gilets jaunes” protests and now the big luxury groups have begun assessing the damage as well.

Cartier parent Compagnie Financiere Richemont saw organic growth slow in the crucial pre-holiday third quarter, with sales climbing 6 percent at actual rates and 5 percent at constant ones.

That compares with the first half of the 2018-19 year, when sales rose 6 percent at actual exchange rates and 8 percent at constant ones. Neither set of figures includes Yoox Net-a-porter Group and Watchfinder, which Richemont acquired last year.

In the three months to Dec. 31, Richemont said it saw growth in all regions except for the Middle East and Europe. Sales in France were damaged by social unrest that saw luxury goods makers and other retailers board up their shops on prime shopping streets in Paris and elsewhere in the country for six consecutive Saturdays in November and December, the most important trading time of the year.

Richemont’s retail sales were up 5 percent, with growth slowing in December due to the store closures in France as well as a strong comparative base, year-on-year, for high-end jewelry sales.

Cartier and Van Cleef & Arpels have 6 percent and 3 percent of their store base in France, respectively. Despite the store closures, jewelry managed to outperform other divisions at Richemont, with an 8 percent uptick fueled by jewelry as well as watches.

Richemont said in the third quarter update that the protests had negatively impacted tourism, too — and there could be more to come. While France itself is not a hugely significant market for the big luxury goods groups, the country is the symbolic capital of luxury fashion, jewelry, beauty and fragrance, and both Kering and LVMH Moet Hennessy Louis Vuitton are headquartered there.

The yellow vest protests made headlines around the world, and wreaked havoc well beyond the slick shopping streets of Paris. Protestors have vandalized government buildings and more than half of the country’s speed camera network as well as burning cars and motorbikes. Violent clashes between police and protestors have continued into the New Year.

Over the next few months, that unrest could mean fewer trips for Chinese tourists in particular, who are known for changing their plans at the last minute if there’s trouble in a particular region or if there’s a better deal to be had elsewhere.

The next few months could also see luxury spending diverted to other markets such as the U.K., where the pound is weaker due to Brexit, or to Mainland China, which already saw a double-digit uptick in the third quarter.

LVMH is due to report its 2018 financial results on January 29, and the impact of the yellow vests protests remains to be seen. The same goes for Kering, which reports its full-year numbers on February 12.

In the third quarter, overall sales at Richemont rose 25 percent to 3.92 billion euros. At constant exchange rates, they were up 24 percent, including YNAP and Watchfinder, two online businesses that were consolidated in May and June 2018, respectively.

Stripping out the impact of YNAP and Watchfinder, Richemont said its jewelry, watch and other businesses saw a 10 percent increase in sales in Asia-Pacific, reflecting double-digit growth in Mainland China and “good increases” in other main markets.

Sales growth in Hong Kong slowed, primarily due to the strength of the Hong Kong dollar versus the renminbi, which resulted in lower tourist spending.

Sales in the Americas rose by 9 percent, benefiting from good performances at Cartier and Van Cleef & Arpels.

In Japan, a 7 percent expansion in sales was driven by continued domestic and tourist spending as well as by the impact of newly opened, directly operated boutiques.

Unfavorable currency movements and a strong basis of comparison weighed on sales in the Middle East and Africa, which decreased by 13 percent over the period.

Specialist watch sales were flat, while sales at Cartier and Van Cleef & Arpels rose 8 percent, fueled by jewelry and watches.

Richemont’s “other business” area, which includes Dunhill, Alaïa, Chloé, Montblanc and Peter Millar, rose by a mid-single digit, excluding the impact of the Lancel sale, which weighed on growth.

Richemont sold Lancel to Piquadro last June as part of a strategy to dispose of non-core assets and to focus on watches, jewelry, high-end soft accessories and e-commerce.

YNAP posted double-digit growth across all regions with “solid performances” across its business lines, while Watchfinder’s sales expanded “more moderately,” the company said.

Richemont’s numbers were broadly in line with projections from analysts, who noted the marked slowdown in sales growth in the third quarter. Melania Grippo, analyst at Exane BNP Paribas, said the turnaround at Richemont’s specialist watch division was clearly taking longer than expected.

Analysts had forecast a 2 percent uptick in the division. Flat watch sales also impacted Richemont’s wholesale channel, where sales rose 1 percent, reflecting what the company described as “ongoing, cautious watch inventory management and tighter distribution.”

In a report titled “Not Worse Than Feared,” Rogerio Fujimori, analyst at RBC Capital Markets, said Richemont’s 5 percent organic growth was “good enough” given the difficulties in the quarter, including the social unrest in France, negative currency trends in Hong Kong and tough comparatives for high jewelry sales in the month of December.

Richemont’s net cash position on Dec. 31 amounted to 2.3 billion euros, with a gross cash position at 6.6 billion euros following the 4 billion euros corporate bond issued in March 2018.

The company did not give an update on its progress setting up a joint venture with Alibaba, which both parties revealed in November. The JV’s aim is to take YNAP and Mr Porter services to the domestic Chinese customer and to Chinese travelers.