Richemont has reported disappointing results for the first half of its fiscal year, primarily due to a sharp decline in demand from China, impacting luxury stocks across the sector. While revenues in the Americas and Europe grew, the Asia-Pacific region saw an 18% drop. Overall, Richemont’s operating profits fell by 17%, and net income drastically decreased due to significant asset impairments. The outlook remains cautious amid ongoing economic uncertainties in China and rising costs in Europe.
Richemont’s Disappointing Performance Amidst Luxury Market Challenges
The Swiss luxury goods powerhouse, Richemont, has reported a disappointing performance for the first half of its fiscal year ending March 2025, largely attributed to a significant decline in demand from China. This news has put additional pressure on luxury stocks in Paris, creating a mixed earnings season for the sector.
While Hermès managed to achieve remarkable double-digit growth for its third quarter, both LVMH and Kering faced declines in their revenues. LVMH’s sales fell by 3% on a comparable basis, while Kering saw a staggering 16% drop. Richemont is not immune to the challenges facing the luxury market, particularly with its sales in the Asia-Pacific (APAC) region plummeting by 18% year-on-year, excluding currency effects.
Regional Performance and Financial Insights
In the first half ending in September, Richemont’s total revenues reached 10.1 billion euros, reflecting a slight downturn of 1% in published data, while remaining stable at constant exchange rates. The company’s performance varied significantly across regions; while the Americas and Europe reported increases of 11% and 5% respectively, Japan experienced a remarkable growth of 42% at constant exchange rates.
Johann Rupert, chairman of the board, noted that the group’s balanced geographical exposure has enabled it to mitigate the 19% drop in sales observed in the APAC region, primarily caused by the downturn in China. In terms of product categories, the jewelry segment saw a 4% increase in sales, contrasting sharply with the 16% decline in the watch division.
Despite these challenges, current operating profits fell by 17% at actual exchange rates, leading to a reduction in operating margins from 26% to 21.9% compared to the prior year. Additionally, net income dropped significantly to 457 million euros from 1.505 billion euros last year, partially due to a hefty 1.3 billion euro loss related to asset impairments from the Yoox-Net-A-Porter Group.
The mixed results have led to a tepid response from investors, with Richemont’s stock experiencing a 5% decline on the Zurich Stock Exchange. This downturn is echoed in the Paris market, where other luxury stocks such as Kering and LVMH also faced losses.
Analysts suggest that the luxury sector may continue to experience volatility, particularly in light of Richemont’s cautious outlook regarding the current market cycle. The uncertainty surrounding China’s economy, especially in the real estate sector, adds another layer of complexity. Furthermore, issues such as customs tariffs and increasing taxation in Europe could further strain luxury consumption.