Richemont drops on signs luxury demand is weakening in US, China

afr.com:

Richemont led luxury-goods stocks lower amid concerns that demand in the US and China, two of the biggest markets for the industry, is starting to sputter.

The Swiss owner of Cartier reported a surprise drop in revenue from the Americas in the three months through June. While Richemont’s sales from Asia rose sharply, China reported slower-than-expected economic growth on Monday, signalling signs of a possible pullback in consumer spending.

Richemont fell as much as 8.2 per cent, the steepest intraday decline in more than year. LVMH dropped as much as 3.7 per cent and Hermes fell as much as 4.2 per cent.

The luxury-goods industry has been counting on a rebound in China after that country’s reopening would make up for weakness in the US market. Now Richemont and its peers are contending with the prospect that its two main growth motors are weakening. Last week, Burberry Group said the low end of the luxury market in the US softened.

Richemont chairman Johann Rupert said in May that the US market was at risk of a downturn, predicting the country will go through a credit contraction.

Richemont reported an overall 19 per cent gain in sales. Jewellery revenue increased 24 per cent, meeting analyst expectations, while its specialist watchmaker division reported sales growth of 10 per cent at constant currencies, slightly below analyst consensus forecasts.

An 11 per cent sales increase in Europe was driven by resilient domestic spending as well as tourism from the US, the Mideast and China.

In April, LVMH joined the list of the world’s biggest companies by market capitalisation, entering the top 10.

The owner of Louis Vuitton, Christian Dior and Tiffany became the first European company to be valued at more than $US500 billion