Richemont Group Releases Q3 Briefing Asia is underperforming
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On January 15, Richemont released its third-quarter results for the fiscal year 2014/2015, revealing a sharp decline in Asia-Pacific sales that sent its stock price plummeting by over 14% in a single day. The report covered the period from September 1, 2014, to December 31, 2014.
During this time, the Group reported total sales of 3.051 billion euros (approximately 3.59 billion U.S. dollars), reflecting a 4% increase compared to the same period in 2013. However, at constant exchange rates, sales remained flat, falling short of the 1% growth expected by Reuters. While Europe, the Middle East, and the U.S. saw strong growth, the Asia-Pacific region suffered a significant drop, largely due to the "Occupy Central" protests in Hong Kong, which led to a sharp decline in watch demand.
Richemont maintained a strong cash position, with a cash balance of 4.9 billion euros as of December 31, 2014—up 14% from 4.3 billion euros in the same period the previous year. Over the first three quarters of the fiscal year, total sales increased by 3% year-on-year, with a 2% rise at constant exchange rates.
Regionally, Europe saw sales reach 1.192 billion euros, up 9% at constant exchange rates, driven by the weaker euro and increased spending by international tourists. U.S. sales reached 547 million euros, rising 7% at constant exchange rates, though this marked a slowdown from the previous six months. In contrast, the Asia-Pacific region struggled, with sales dropping 12% to 1.07 billion euros at constant exchange rates. Hong Kong and Macau were particularly weak, with some stores temporarily closing during the Chinese Golden Week due to the "Occupy Central" situation.
Japan also faced challenges, with sales reaching 242 million euros, up 2% at constant exchange rates, but still impacted by higher consumption taxes.
In terms of sales channels, direct retail sales accounted for 57.16% of total sales, amounting to 1.744 billion euros, up 2% at constant exchange rates. However, wholesale sales fell by 2% to 1.307 billion euros. The report highlighted that new store openings, jewelry sales, and luxury e-commerce platforms like Net-a-Porter were key drivers of growth in the retail segment.
Looking at product categories, jewelry brand sales declined by 1% year-on-year at constant exchange rates, but performed well in retail channels. Watch brands, however, saw a 4% drop in sales, affected by cautious partner behavior and declining demand in Hong Kong and Macau. Meanwhile, Net-a-Porter continued to outperform, contributing to a 7% year-on-year increase in the "other" business segment, including e-commerce and fashion.
The quarterly report underscored that the luxury industry had not yet hit rock bottom. Earlier, Burberry warned that declining Hong Kong sales could impact full-year profits, while Tiffany lowered its 2014 earnings forecast due to weak holiday performance and worsening Japan sales. These trends suggest that the luxury sector was still navigating challenging market conditions.