Chinese boost luxury group Richemont too despite inflation as sales in Americas drop

Last week, Burberry had reported an 18pc rise in first-quarter comparable store sales

ZURICH (Reuters/Web Desk) – The affluent people, mainly in China, are spending more on luxury items despite the high inflation – a trend confirmed by Switzerland-based Richemont which reported a 14 per cent increase in first-quarter sales on Monday, boosted by a strong rebound in Asia and demand for its high-end jewellery.

But the owner of Cartier and Van Cleef & Arpels jewellery also pointed to a downturn in the Americas, which weighed on its shares.

The shares, which have gained 53pc in the last year, were down 3.1pc in pre-market activity in Zurich. Swatch – a rival Swiss watchmaker – last week reported its highest ever half-year sales, buoyed by the removal of Covid-related restrictions in Asia.

Similarly, British luxury fashion brand Burberry on Friday last week had reported an 18 per cent rise in first-quarter comparable store sales, meeting market expectations thanks to a continued rebound in China.

Sales in mainland China, its biggest market, were up 46pc in the 13 weeks to July 1, reflecting the country's emergence from Covid-19 lockdowns last year.

As far as Richemont is concerned, posted a 19pc rise in organic sales which exclude the impact of currency movements while analysts expected 20pc, Bernstein analyst Luca Solca noted.

"We would expect a muted reaction from the market to today's announcement," he said.

Richemont's Asia-Pacific business boomed, helped by the lifting of Covid-related restrictions and reopening of borders, pushing the company's sales 32pc higher.

But the Americas, where concerns have risen in recent months about a slowdown in luxury demand in the United States, saw sales fall 4pc, said the company, which also owns several high-end watch brands.

"Negative growth in the Americas is likely to temper some of the market expectations," said Vontobel analyst Jean-Philippe Bertschy.

It was in line with what Burberry had reported – the quarterly sales in the Americas were down 8pc, having dropped by 7pc in the previous quarter.

Overall, Richemont said its sales increased by 14pc to 5.322 billion euros ($5.97bn) in the three months to the end of June.

That was short of the 5.43bn euros expected by analysts at Barclays and 5.54bn expected by analysts at Bank Vontobel. Richemont does not report first quarter profit.

The sales increase was led by jewellery, where revenue rose by 19pc to 3.60bn euros.

The company's specialist watchmakers, which include IWC, Piaget and Vacheron Constantin brands, posted a 6pc increase in sales to 1.06bn euros.