Chinese demand has swooped to the rescue of Cartier-owner Richemont, which reported a 25% increase in sales across the mainland, Macau and Hong Kong in a quarterly trading update on Thursday.
These surprisingly strong sales come amid a less-than-optimistic time for luxury demand in the crucial Chinese market.
Jefferies data shows that Chinese luxury spending fell from 37% of global luxury sales in 2019 to just 22% by the end of 2023, as an anticipated post-lockdown bounceback failed to materialise.
“Returning to Asia six months after our first post-reopening visit was less uplifting than hoped for,” Jefferies wrote last month. “Unlike in June, investor sentiment is now universally downbeat… there appear to be few reasons for optimism beyond ongoing share gains by quiet luxury and store-of-value champions.”
Chinese sales helped to offset a poor showing in Richemont’s home territory in the final three months of 2023, where European sales fell 3% year on year.
Sales across the Americas came somewhere in the middle, with an 8% year-on-year increase.
Despite Richemont’s strong showing in China, Morgan Stanley (NYSE:MS) analysts remain cautious.
“China's cooling economy and ongoing property crisis have been a worry for the (luxury) sector which has relied on the country for growth in recent years and had hoped for a strong rebound from strict COVID lockdowns there”.
Unfortunately, Richemont’s resilience was not shared by London-listed Rolex merchant Watches of Switzerland Group PLC (LSE:WOSG), which today conceded that “challenging macroeconomic conditions impacted consumer spending in the luxury retail sector”, with the UK operation hardest hit.
Watches of Switzerland downgraded its full-year revenue guidance, unsurprisingly resulting in a 30% share price plummet on the London Stock Exchange.
Richemont, in comparison, rallied over 10% on the Swiss exchange.
Watches of Switzerland’s lack of exposure to the Chinese market may have worked against it, though it faces a myriad of other headwinds, not least emerging competition from Swiss watch retailer Bucherer.
It is also having to contend with lower luxury watch prices on the primary and secondary markets.
"The festive period was particularly volatile this year for the luxury sector, with consumers allocating spend to other categories such as fashion, beauty, hospitality and travel. Whilst we are disappointed with this trend, we are encouraged by our market share gains in both the US and UK," said Watches of Switzerland chief executive Brian Duffy.