Richemont sales unexpectedly jumped by double digits during the holiday shopping season as consumers splurged on Cartier jewellery, a tentative sign that demand for luxury goods may be recovering.
Sales soared 10% during the three months through December at constant exchange rates, Richemont said Thursday. Analysts had expected an increase of less than 1%. The Americas and Europe drove the performance, with purchases of expensive jewellery outweighing weak watch sales, which have dragged on the group’s profit.
“We view these results as exceptionally strong,” Piral Dadhania, an analyst at RBC Capital Markets, wrote in a note.
The performance lifted shares of Richemont by as much as 18% to a record and boosted other luxury groups on optimism the worst may be over for the industry, which has faced cooler demand after years of aggressive price increases. Though Richemont’s greater exposure to jewellery gives it some insulation from the volatility of other fashion categories, rivals LVMH, Kering and Hermes International also rose on the news.
Even Richemont’s results in the Asia Pacific region, where sales slid by 7% in the past three months, were much better than estimates. Only China, where shoppers have shown less appetite for luxury amid worries about the health of the real estate market, remained a weak spot, with sales dropping 18%.
The final quarter of the year is typically the most important period for luxury labels because of holiday shopping. Higher spending by North American and Middle Eastern tourists helped increase sales in Europe by 19%, triple estimates.
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Richemont owns Cartier and Van Cleef & Arpels, two sought-after jewellery brands. This segment, known as hard luxury, often does better in times of uncertainty as jewellery tends to be more timeless than handbags and other fashion items. Richemont’s watch segment also beat estimates, with revenue falling less than expected.
“Although still fragile, the market is showing signs of stabilization” in China, Vontobel analyst Jean-Philippe Bertschy wrote in a note. But overall, “despite the challenging situation in China and in watches, Richemont has never been stronger,” he added.
Some companies catering to the very wealthy have weathered the luxury downturn better than those appealing to the less well-off.
See also: Bulgari CEO sees China luxury market recovering in next two years
Earlier this week, Brunello Cucinelli posted strong quarterly revenue and forecast sales growth of 10% this year and next. The Italian brand sells cashmere and vicuña bomber jackets for EUR17,500 ($24,616).
LVMH Moët Hennessy Louis Vuitton , the world’s biggest luxury group, will report earnings on Jan. 28. The French company, led by billionaire Bernard Arnault, is more exposed to the so-called “soft luxury” segment, which offers handbags and ready-to-wear fashions.
