Richemont Sales Jump

Swiss luxury group Richemont drove a significant increase in luxury stocks on Thursday after reporting stronger-than-expected sales for the final three months of 2024.

Shares in Richemont, which owns Swiss watch brands Piaget, Jaeger-LeCoultre and IWC, rose by 7% in premarket activity, while rival Swatch increased by 3.9%.

This growth was primarily driven by heightened demand in the U.S. for its prestigious brands, Cartier and Van Cleef & Arpels. Revenues from jewelry, Richemont's core business and largest division, reached €4.5 billion, marking a 14% like-for-like increase compared to last year, and exceeding analyst expectations.

In Q3 2024, the group reported a 10% increase in sales, both at constant and actual exchange rates, achieving its highest-ever quarterly sales of €6.2 billion. This performance is shocking given the challenging market conditions, significantly as sales in Greater China fell by 18% due to weak demand in the region. Overall sales in the Asia Pacific declined by 7%. However, other Asian markets helped mitigate this decline, with Japan experiencing a 19% increase in sales.

In Europe, sales rose by 19%, driven by higher domestic demand, particularly from end-of-year purchases, while sales in the Americas increased by 22%. Additionally, sales in the Middle East grew by 20%, collectively offsetting the losses in China.

Richemont's sales report marks the beginning of earnings announcements across the luxury industry, which is expected to show some improvement compared to earlier in 2024, supported by a more substantial U.S. market. The luxury sector has been undergoing a considerable adjustment since the peak of the Covid-era boom, with lower growth rates leading to a divergence in brand performance, highlighting a wide gap between the leader and laggers performers.

This strong trading update provides an encouraging early indication of the sector's performance during the crucial Christmas period. It follows a challenging first nine months of 2024, which saw a decline in revenues due to China, a previously key growth driver for the industry.

Richemont's business in Greater China continued to underperform compared to the rest of the group, with sales dropping by 18% in Q4 2024. However, this marked an improvement over previous quarters. Overall, Richemont's performance, which includes fashion and accessories alongside watches and jewelry, suggests that the worst of the slowdown for the global luxury sector may have passed.