Breaking News
Get 40% Off 0
👀 Reveal Warren Buffett's stock picks that are beating the S&P 500 by +174.3% Get 40% Off

Luxury Misses Out on Market Bounce After Richemont Warns of China Woes

Published May 20, 2022 19:22
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.
 
CFR
+1.81%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
LVMH
+0.43%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
BRBY
+0.16%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
DIOR
+0.56%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
HRMS
-0.22%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Geoffrey Smith 

Investing.com -- Luxury stocks across Europe underperformed on Friday after Swiss-based Richemont (SIX:CFR) warned of a big hit to sales from the closure of Chinese boutiques due to COVID-19 lockdowns.

The Chinese economy will suffer a slowdown for "longer than most people think," Chairman Johann Rupert told a webinar accompanying the presentation of the group's full-year results. He added that some 40% of the group's boutiques in China are currently closed due to lockdowns. 

The news overshadowed a strong set of results that showed operating profit more than doubling in the 12 months through March, helped by an expansion of over 6 percentage points in its operating margin. Sales rose 44% at constant exchange rates. Rupert highlighted strong local demand in Europe, which "more than offset" a decline caused by the drop in inbound tourism due to pandemic travel restrictions. 

Net profit rose 61% to 2.08 billion euros ($2.18 billion) allowing the company to raise its dividend by 13%. 

However, it was Rupert's comments on China that dominated reactions, due to the outsized importance of that market to the world's biggest luxury names. Richemont itself gets over 40% of its global sales from the Asia-Pacific region, the bulk of which is from mainland China and the territories of Hong Kong and Macau. Shanghai, its most lucrative regional market on the mainland, has been under various degrees of lockdown for over two months now.

Richemont stock plunged as much as 11% on the news to hit a seven-month low in early trading. It pared some of those losses later to trade down 9.4% by 5 AM ET (0900 GMT). The gloom also hit other luxury companies with big exposure to China: LVMH (EPA:LVMH) stock fell 0.4%, while Christian Dior (EPA:DIOR) stock fell 0.6% and Hermes (EPA:HRMS) stock fell 1.0%. 

The only big stock in the space to escape the general underperformance was Burberry (LON:BRBY), whose numbers earlier in the week had been well-received. Burberry is the only high-end fashion name still in positive territory for the week, with a gain of 2.4%.

Despite the fact that the group's figures suggested its client base is largely insensitive to price hikes, Rupert warned of the risk of inflation over the coming year, given that the response needed to bring it under control could hurt growth badly. 

"Even if the worst of COVID is hopefully behind us, we face a global environment which is the most unsettled we have experienced for a number of years," Rupert said in his letter to shareholders. The troubled global backdrop was also evident in a 98 million euros charge for discontinuing its business in Russia, coupled with an associated inventory write-down of 70 million euros.

 
 
 
Luxury Misses Out on Market Bounce After Richemont Warns of China Woes
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email