Johann Rupert’s Richemont feels the pain

Richemont’s profit slumped in the first half as the Swiss luxury group’s watchmaking division suffered from falling demand in China.

The Cartier owner reported a 12% drop in operating profit to €2.2 billion ($2.37 billion) for the six months through September, below analysts’ €2.47 billion estimate. Sales were stable at constant exchange rates, slightly missing expectations.

Richemont, which also owns watchmaker Vacheron Constantin and jewellery house Van Cleef & Arpels, joins luxury peers including LVMH and Kering SA in feeling the pinch from more cautious shoppers in China.

Demand for luxury watches has also been softening more broadly following a pandemic-era boom.

Richemont’s jewelry division proved resilient, while the watchmakers “weighed heavy” on the results, Bernstein analyst Luca Solca said in a note to clients.

The shares fell as much as 2% in early Swiss trading, trimming the gain over the last year to 15%. Thanks to the strength of its jewellery business, Richemont’s stock has outperformed many luxury rivals in the past year. 

Sales growth in the US, Europe and Japan was offset by an 18% drop in the Asia Pacific region, which includes China. Chairman Johann Rupert said Chinese demand for pricey goods “will take longer to recover,” and is particularly hitting its watch brands.

Sales of expensive timepieces dropped by 16% during the period, a steeper decline than analysts had expected.

Jewellery sales met estimates, growing 4% at constant exchange rates, but the company said limited price increases weren’t enough to offset a rise in input costs and raw materials such as gold. 

Richemont, controlled by South African billionaire Rupert, named Nicolas Bos, who boosted sales at Van Cleef, as group chief executive officer in May.

The company also said the former head of Vacheron Constantin, Louis Ferla, would take over running Cartier, the French jewelry maker that is Richemont’s top selling brand. 

The Swiss group in October said it agreed to sell its e-commerce business Yoox Net-A-Porter to Germany’s Mytheresa for a one-third equity stake in the luxury online retailer.

The deal to offload the loss-making business came nearly a year after a plan to sell YNAP to Farfetch fell apart.