Richemont: Sales Strong, Helped by Recovery in Asia, as Sales in Americas Muted

We are maintaining our fair value estimate of CHF 140 per share for wide-moat Richemont CFR as the company reported solid growth in the first fiscal quarter led by the Asia-Pacific region.

Sales increased by 19% at constant exchange rates, with 40% growth in the Asia-Pacific region on a low comparison basis, as last year’s first quarter was affected by lockdowns in China (sales in Asia-Pacific down 15% in first quarter 2022/2023). Sales in Europe were up 11%, helped by still solid local and tourist demand, and increased by midteens in Japan and the Middle East and Africa. Americas was the only region where sales were down (down 2%) supporting our view of deceleration in this market after two years of unusually strong growth helped by a number of nonrecurring tailwinds.

Jewellery Maisons performed the strongest, up 24% at constant currencies, which should bode positively for the profitability of the group (Jewellery Maisons is the most profitable division). Specialist watchmaker sales were up 10%. Retail channels also continued outperforming, with 24% constant-currency growth. Direct to consumer sales now represent 74% of revenue, supporting brand intangible moat source in our view through better control over pricing and customer experience. Remarkably, retail and online sales amounted to 60% of specialist watchmaker sales, traditionally wholesale-driven businesses. We believe a higher share of retail sales could help avoid overcapacity and grey market headwinds that the company went through in 2015-2020, making the group more resilient.