Richemont points to China slowdown, spooks sector

Jan 21 2013, 17:19 IST
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Richemont points to China slowdown, spooks sector (Reuters) Richemont points to China slowdown, spooks sector (Reuters)
SummaryShares in the world's second-biggest luxury goods company fell over 6 percent in early Monday.

Cartier watches maker Richemont said sales growth had ground to a halt in the Asia-Pacific region, rekindling fears about a market which has been the driving force of luxury sales in recent years.Shares in the world's second-biggest luxury goods company fell over 6 percent in early Monday trading after it posted a smaller-than-expected rise in fourth-quarter group sales.

Other luxury stocks, which have been rallying since the start of the year on hopes demand in China was recovering from a wobble in 2012, were also dragged lower, including world number one LVMH and rival watchmaker Swatch.

“At this stage, it is unclear how business patterns may develop and how the business in the Asia Pacific region will evolve in the near future,"Richemont said in a statement.

The Swiss firm's caution contrasts with more upbeat news recently from British luxury brand Burberry, which pointed to a rebound in Chinese demand.

Chinese shoppers accounted for a quarter of luxury purchases globally and surpassed U.S. consumers to become the world's biggest buyers of luxury goods last year, according to consultancy Bain & Co. Earlier this month, Swatch forecast strong growth for the Chinese New Year and perhaps even for the year as a whole in China, while U.S. jeweller Tiffany & Co said China was its only bright spot.

Some analysts said that while investors were likely to be spooked by Richemont's lower-than-expected sales, the maker of Montblanc pens was perhaps being overly prudent.

"I would be wary of throwing the baby out with the bath water. I think some of the sales were postponed from December given the timing of the Chinese new year, which starts in February vs January in 2012," said Jon Cox, analyst at Kepler Capital Markets.

“Overall, anecdotal evidence points to a recovery in the greater China region," Cox said, adding he would not change his forecasts numbers for now.


Demand in China slowed down in the second half of last year due to the once-in-a-decade leadership change in the Communist Party and a crackdown on corruption.

But it is expected by analysts to rebound strongly in the first quarter with the Chinese New Year celebrations in February and the National People's Congress in March, where government positions will be confirmed and gifts bestowed.

Richemont sales rose 5 percent at constant exchange rates in the three months to Dec. 31 to 2.86 billion euros ($3.8 billion),

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