The bling bloodbath is so last season.
Cie Financiere Richemont SA on Thursday reported a 10 percent increase in sales excluding currency movements in the three months ended Dec. 31, far outpacing the less than 1 percent that analysts had expected.
The Swiss company has kicked off the luxury reporting season in style. Its performance â and a strong showing from cashmere king Brunello Cucinelli SpA â should go some way in reassuring investors that the worst is over for Big Luxury. Last year, the sector suffered a slump as Chinese shoppers reined in purchases and affluent US consumers recoiled at hefty price increases.
While China remains in the doldrums â Richemontâs sales in the mainland, Hong Kong and Macau declined 18 percent in the fiscal third quarter â conditions in this crucial market donât seem to be getting worse. The US has strengthened since the presidential election, helped by the melt-up of the S&P 500 and the ascent of Bitcoin, and Richemontâs sales in the Americas rose by 22 percent.
But Richemont has two attributes that make its performance particularly sparkling â and not all luxury groups can boast the same.
First, the company generated more than half of its sales from jewellery in its last fiscal year. When times are tough, itâs usually handbags that outperform. This time around, itâs jewellery. Richemontâs sales in this division rose 14 percent in the third quarter, compared with the 4 percent expected by analysts. Demand for watches continued to be weak but was also better than expected.
The price increases put through in leather goods â the cost of some top-end handbags has doubled since 2019, according to analysts at HSBC Holdings Plc â have made jewellery look better value.
Whatâs more, the luxury market is maturing. âItâ bags have been the must-have items for the past 15-20 years. As consumers become more comfortable with buying upmarket goods, they graduate to other product lines. So itâs not surprising that many women now prefer a bauble to a bag.
Second, Richemont owns two of the best-known names in the jewellery sector: Cartier and Van Cleef & Arpels. Cartier has bucked the downturn in the watch market to become one of the most coveted brands. Van Cleef & Arpels Clover jewellery has become a Tik Tok sensation. Both underline the polarisation between the biggest labels, which consumers continue to lust after, and everyone else.
Richemontâs shares rose as much as 18 percent in early trading on Thursday, and stock prices across the sector advanced as well. Given Richemontâs particular qualities, that indiscriminate enthusiasm looks misplaced.
LVMH Moet Hennessy Louis Vuitton SEâs up to 9 percent rise is deserved. The bling behemoth led by Bernard Arnault has exposure to jewellery through Tiffany & Co., Bulgari and Fred. It also owns two of the biggest names in luxury: Louis Vuitton and Dior. Its considerable resources mean it can afford to shout louder than rivals to keep its houses at the front of consumersâ minds.
Similarly, Hermes International SCA has more demand than it can meet for its Birkin and Kelly bags, which helps it outperform in difficult times. Recent developments, such as a dupe of a Birkin bag briefly sold on Walmartâs website, dubbed the âWirkin,â only serve to reinforce the status of these mythical items. Prada SpAâs Miu Miu continues to be the watch word for cool girl style.
In contrast, companies that are trying to revive their fortunes, such as Britainâs Burberry Group Plc and Kering SA, which is striving to turn around Gucci, might struggle to bounce back as strongly. Their share price jumps on Thursday look overdone.
To some extent, a rising tide will lift all luxury boats. But not many will be able to float away on a glittering sea of jewels like Richemont.
By Andrea Felsted
