In the third quarter of its financial year – the three months to end-December 2020 – Richemont reported a modest recovery, with sales rising 5% over the same period a year before at constant exchange rates. This modest recovery was enough to moderate its results for the nine months to date, with revenue for the period down 14%, as compared to the drastic 38% plunge in sales for the first half of the year.
Owners of over two dozen watch and jewellery brands including Cartier, IWC, and Panerai, the Swiss luxury conglomerate was buoyed by robust demand in Asia, its biggest regional market, as well as the Middle East and Africa. Combined, the two regions make up approximately half of Richemont’s global sales.
The Asia Pacific enjoyed a 25% rise in sales, driven largely by exceptional demand in mainland China, where revenue rose an impressive 80% for the period, with sales in Taiwan also seeing a marked 29% increase – both consequence of a return to regular economic activity as the pandemic was brought under control, and the inability to travel and shop overseas.
Paradoxically, the results in the Middle East were driven by a revival of tourist spending in Dubai as flights resumed, and domestic spending in Saudi Arabia where citizens cannot easily go abroad. This contributed towards a remarkable 27% increase in sales for the region.
Elsewhere, sales too rose, albeit in smaller, single-digit increments. Bolstered by domestic demand, sales in the Americas rose by 3%. Japan saw a 1% increase, though this figure is expected to drop due to the recent implementation of stricter pandemic control measures in the major cities.
However, demand in Europe remains poor, with sales declining by 20%. Long a market driven by high-spending tourists, Europe is suffering a double blow from both the lack of inbound travellers and harsher lockdown measures resulting in decreased domestic spending.
Online sales surge
The diverging performance of online versus offline, as well as jewellery versus watches, continued in the third quarter.
As stores remain shuttered globally due to the pandemic, online sales – Richemont owns pre-owned watch merchant Watchfinder and luxury-fashion retailer Yoox Net-a-Porter (YNAP) – surged by 17%, outpacing growth at the group’s brick-and-mortar distributor channels, which are made of of its own stores, known as retail, and third-party retailers, or wholesale.
The increase in the online retails sales offset the continued decline in wholesale revenue, which is mainly made up of sales to specialist watch retailers, which have continued to reduce inventories. As a result, wholesale revenue decreased 8%.
But retail sales at Richemont’s own stores – primarily those of its outperforming jewellery division – remains the largest driver of group revenue and rose 8%.
Richemont’s jewellery division, made up of Cartier and Van Cleef & Arpel, continues to eclipse its watch brands as a revenue generator. Jewellery sales increased 14%, while watchmakers saw sales falling 4%.
Still, the small decline in sales is a turnaround from the first six months of the year, where sales fell 38%. The recovery was primarily on the back of double-digit growth in the Asia Pacific, especially in China, which played host to the Watches & Wonders fairs in Shanghai and then Sanya.
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