China gift rules stunt Richemont’s revenue

Thomas Mulier

Richemont reported revenue growth for the first five months of its financial year that missed estimates because of weakness in mainland China.

Sales rose 9 percent, excluding currency shifts, in the period to August, Geneva-based Richemont said yesterday.

Analysts had expected 10 percent growth, according to the median of 21 estimates. The stock fell as much as 3.2 percent, leading declines in the Swiss market. On the JSE, Richemont shares fell 1.82 percent to close at R97.98.

Revenue in the Asia-Pacific region, the source of 41 percent of Richemont’s sales last year, is rising more slowly as China cracks down on the use of watches and jewellery as bribes and illegitimate gifts. Growth in that market was 4 percent in the five months, continuing a slowdown in the last financial year and compared with a 46 percent gain a year earlier.

“The further decline in China is disappointing,” Allegra Perry, an analyst at Cantor Fitzgerald, said in a note. “The upcoming anniversary of anti-gifting measures should raise the prospect for stabilisation in this critical market.”

The shares have gained 52 percent in the past year, compared with a 26 percent gain in shares of Tiffany.

Mainland China’s deceleration was mostly due to “prudent consumer sentiment after several years of exceptional expansion”, Richemont said. Sales rose in Hong Kong and Macau.

Total revenue gained 4 percent, compared with the 6 percent median estimate of 14 analysts surveyed.

Sales rose 14 percent in the 12 months to March, Richemont said in May when chairman Johann Rupert also announced plans for a one-year sabbatical due to begin after yesterday’s annual general meeting.

Makers of luxury goods have boosted sales as the ranks of the rich have expanded. The number of people with assets worth at least $30 million (R298m) have risen more than 6 percent to a record 199 235 this year, according to a report by Wealth-X and UBS.

Richemont reports five-month sales figures each year when it holds its shareholder meeting. – Bloomberg