Pandemic means tough Q1 at Richemont, but China is bright spot
Swiss luxury giant Richemont was hit hard by Covid-19 in Q1 (the three months to June 30) with its sales down by 47% to €1.933 billion at actual and constant exchange rates.
It endured double-digit sales decline across “all regions, distribution channels and business areas due to widespread temporary store and distribution centre closures, a halt in tourism and subdued consumer sentiment in many markets”.
That said, the falls were “less pronounced in the Middle East and Africa and in Asia Pacific” with APAC actually benefiting from 49% sales growth in China.
It’s clear that China is continuing to prove that it holds the future of the luxury sector in its hands. And it’s also clear that physical shops and tourism remain crucial to luxury firms, despite the rise of online.
That said, e-tail was key during the period with the channel showing “stronger resilience than sales in other channels”.
Excluding the firm’s online-only businesses such as Net-A-Porter, online sales contributed 8% of group sales compared to just 2% in the prior year and that could mean the pandemic has been a catalyst for e-tail growth at the firm generally.
Overall, Richemont’s Jewellery Maisons, of which Cartier is the star, and its Online Distributors “fared better than the other business areas”.
The company should be starting to get back on track in Q2 because as of June 30, all distribution centres and most stores have reopened, although it clearly won’t be business-as-usual just yet because global tourism, stores in the Americas and travel retail are still not operating normally.
Looking at the results in more detail, the company’s sales fell 59% in Europe to €436 million as a lack of tourism affected turnover even after lockdowns were eased.
Meanwhile in Asia-Pacific sales fell a less worrying 29% to €1.013 billion, helped by that rise in China. In the Americas, sales were down 61% to €277 million, while Japan fell 64% to €112 million.
The Middle East and Africa was down 38% to €155 million. But this latter drop was smaller than it might have been due to unique issues such as the recent internalisation of operations in Saudi Arabia as well as advanced purchases in anticipation of the country’s VAT increase on July 1.
Sales through the Retail channel fell 43% to €1.052 billion as store closures, little tourism and weak demand all took a toll. But China and South Korea proved to be bright spots.
Online was down only 22% at €506 million with China seeing a triple-digit e-tail rise. The online drop might have been less had businesses like Net-A-Porter and Yoox not seen temporary closures of their fulfilment centres.
Finally, Wholesale fell a hefty 65% to €435 million, affected by the same issues as Retail.
As mentioned, the Jewellery Maisons were reasonably robust, although they still saw a 41% sales fall to €1.083 billion, and again, China shone with a 68% sales rise. This was particularly driven by increased online and offline retail spend and the contribution of the recently opened Cartier flagship store on Tmall Luxury Pavilion. Online Distributors dropped 42% to €365 million.
But the remaining business units saw much bigger falls with Specialist Watchmakers down 56% to €359 million. And the Other segment, which includes the company’s fashion brands such as Chloé and Dunhill, was down 59% at €204 million. As usual, the company didn’t give any comment about individual brand performances, although it said the unit as a whole was “impacted by temporary store and distribution centre closures”.
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