Billionaire Johann Rupert warned that interest rates will stay higher for longer, dampening demand across all asset classes.
Rupert, Richemont’s chairman, told investors during a webcast that the world experienced irrational exuberance due to central banks printing money.
“The central banks increased the money supply. The situation was exacerbated by fiscal irresponsibility,” he said.
In response, central banks had to curb inflation through higher interest rates, as free enterprise cannot work without a hurdle rate.
Rupert said that higher interest rates will result in a softening in demand across all categories and asset classes. This includes lower sales in art, cars, and luxury items.
“I suspect interest rates will remain higher for longer than most people think. We prepared for that with €7 billion in cash on our balance sheet,” Rupert said.
He added that the past decade’s exuberance has ended, and growth in the United States and China has slowed.
However, despite the challenges with consumer spending in the luxury sector, Richemont could still produce good results.
Sales increased by 6% at actual exchange rates and 12% at constant exchange rates, fuelled by almost all regions and distribution channels.
Growth was led by Asia Pacific, with sales up 14% at actual exchange rates and 23% at constant exchange rates.
Jewellery Maisons performed particularly well, with sales up 10% at actual exchange rates and 16% at constant exchange rates.
Rupert explained that Richemont was able to grow by gaining market share from competitors.
He said despite new entrants and more companies fighting for consumers’ money, Richemont continues to grow its market share.
“The demand for luxury goods remains there. The affinity for our products remains strong,” Rupert said.