LONDON — Spiraling gold prices, hefty U.S. tariffs and price hikes have failed to deter luxury customers’ appetite for Richemont’s fine jewelry brands, which outstripped analysts’ expectations and notched double-digit growth in the first fiscal half ended Sept. 30.
First-half sales at Richemont‘s jewelry division, which Jefferies described Friday as “a remarkable locomotive for growth,” rose 14 percent to 7.75 billion euros at constant exchange. In the second quarter sales were up 17 percent.
Richemont said all regions delivered double-digit growth in jewelry with the exception of Japan, which was flat.
Jefferies said Richemont is now the fastest growing luxury company, while Citi proclaimed “All that glitters is Cartier,” in its latest report on the Swiss watch and jewelry giant. The banks were expecting the division to climb 10 percent in the second quarter, so the 17 percent hike came as quite a surprise.
It wasn’t just big spenders buying high jewelry at lavish events around the world.
The new Cartier Love Unlimited bracelet and ring.
Courtesy of Cartier
Richemont’s chief executive officer Nicolas Bos said the second-quarter bounce came from “sustained local demand”; from established and new collections, such as Cartier Love Unlimited and Flowerlace from Van Cleef & Arpels, and from a variety of price points.
“Clients have different spending power, and they adapt to different price points and categories,” said Bos after Richemont reported a 10 percent increase in sales at constant exchange to 10.62 billion euros in the first half. At reported exchange, sales were up 5 percent.
He said some people might buy a Van Cleef & Arpels Alhambra bracelet, or a Cartier Love bracelet, instead of fashion accessories which might have similar prices.
Meanwhile, “at the very, very high end, we see collectors and customers looking for unique and expensive pieces. They’re looking at long-term investment value, alongside the pleasure of purchasing and wearing these pieces,” he said.
Bos added that a new mindset has been emerging since the end of the post-pandemic shopping frenzy. Right after COVID-19, luxury shopping habits were driven by a YOLO, “You only live once” mentality, while today, they’re more in a YONO, “You only need one,” state of mind.
And they’re not afraid to splash out.
The Chantilly Zip necklace in
yellow gold, platinum and diamonds from the Van Cleef & Arpels Tokyo exhibition.
Courtesy of Van Cleef & Arpels
Richemont’s chairman Johann Rupert added that the group’s jewelry houses also benefit from their heritage and high-profile branding.
“The beauty of jewelry is that a very big part of the market is unbranded. Watches are different. If you want to increase your watch sales, you really have to gain market share. But because there is so much unbranded jewelry, one can grow into that market,” Rupert said.
Following Friday’s results announcement, Rupert was bullish on more than just the jewelry division.
He said his hope was that U.S. tariffs on Swiss exports would come down following ongoing negotiations between the Swiss and U.S. governments. Later in the day, he got his wish. Those negotiations were ultimately successful for Switzerland, which saw tariffs slashed to 15 percent from the current 39 percent, in line with those of the European Union.
Courtesy Photo
Rupert stressed that, despite having joined South African president Cyril Ramaphosa at a meeting in the Oval Office with U.S. President Donald Trump earlier this year, he had nothing to do with the trade talks and was not part of the Swiss delegation.
He described the tariff tussle between the U.S. and Switzerland as a “misunderstanding,” and said his hope was that it would be “cleared up” soon.
Richemont said the impact of tariffs had so far been contained at around 50 million euros in the first half. That figure risked rising to 300 million euros for the full year if Switzerland and the U.S. had not come to an agreement.
Richemont’s watch division would have borne the brunt of the tariff damage at a time when it has just begun to show some green shoots.
Watch sales, which have been hammered by declining demand, especially in China, were down 6 percent to 1.56 billion euros at reported exchange, and down 2 percent at constant rates in the first half.
Gisele Bündchen at the IWC Schaffhausen stand at Watches and Wonders in Switzerland in 2024.
Getty Images for IWC Schaffhausen
In the second quarter they rose 3 percent at constant exchange, driven by sequential improvement in all regions. Double-digit growth in the Americas region offset declines in Asia-Pacific and Japan, while demand in China, Macao and Hong Kong remained “soft” despite the second-quarter improvement.
In addition to tariffs, the watch division also suffered from rising gold prices and currency fluctuations in the first half. Operating profit fell nearly 70 percent to 50 million euros compared with the corresponding period last year.
Although demand for watches remains soft in China, Richemont principals are hopeful about a progressive recovery in the region, and are taking the long-term view.
“The Chinese are still buying, but we believe they are becoming more selective. And that may remain so, even upon a full recovery. And that’s something we’re happy about,” said Rupert. “The down trend has changed, and we’re seeing some early [positive] signs, but I wouldn’t go as far as to call them green shoots of recovery.”
Bos said YONO is definitely a mindset he’s seeing in China and Korea.
In those countries, he said, clients are buying “with a much more discerning eye. They buy less, and they know exactly what they want. They are looking at the quality of the product and the long-lasting investment value really plays a role. This is something that we see, particularly in jewelry, and I believe it’s one of the factors behind the success of our jewelry maisons.”
Inside the first exhibition at the Fondation Cartier’s new home at place du Palais-Royal in Paris.
Marc Domage/Courtesy of Fondation Cartier pour l’Art Contemporain
Bos added that Richemont is “very optimistic about China, and we continue to invest there. It remains a very, very important market, although we won’t be seeing the type of growth that we were seeing” before, or after, the pandemic, he said.
As reported, most regions showed robust growth in the half, at constant exchange rates.
The Middle East and Africa rose 19 percent, while the Americas grew 18 percent. Sales in Europe were up 11 percent, while Asia-Pacific rose 5 percent. Japan was the only outlier, falling 4 percent.
Group operating profit climbed 7 percent to 2.4 billion euros, while profit for the period surged to 1.81 billion euros from 457 million euros. That increase was due to the nonrecurrence of the 1.2-billion-euro non-cash write-down from discontinued operations linked to the sale of Yoox Net-a-porter group to Mytheresa parent LuxExperience.
Richemont said it achieved those results by keeping a tight lid on costs, while continuing to invest in jewelry manufacturing capabilities, store openings and marketing campaigns.
Rupert said that over the past months Richemont has been “stress-tested by an unprecedented combination of external macroeconomic headwinds” — and its trials are not over.
He said Richemont would continue to “navigate through uncertain times given that the recovery path remains unsteady. Managing the uncertainty will continue to require agility and discipline.”
