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Richemont sees luxury future with wary eyes

By FashionUnited

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Fashion

Leading luxury group Richemont has indicated the economic instability in Europe and the US will affect its outlook over the coming months. After LVMH, Richemont, the Swiss-base group, is the world's second largest luxury company by sales.

It also stated its full year sales would be higher than 2010.

According
to the Financial times, LVMH, Burberry, PPR and Hermès have all reported quarterly sales that beat analysts’ estimates in recent weeks, underlining the resilience both of the Asian consumer and the continuing willingness to spend of the world’s wealthy.

Richemont beat expectations in the first six months of the year, reporting a 10 per cent surge in net income on Friday to €709m ($962m) as consumers in Asia and tourists in Europe and the Americas bought Cartier jewellery and Piaget and Jaeger-LeCoultre watches.

The group sells products under 19 brands, including Purdey, the British gun maker founded in 1814, and Alfred Dunhill, the London-based maker of leather goods and lighters.

Johann Rupert, Richemont’s chairman, said it was “extraordinarily difficult to predict what’s going to happen” for the rest of year.

He said he believed Europe and the US would “be in a mess for a considerable period of time”, although the US had a tendency to fix its problems “more quickly”.

Nonetheless, as the group had seen strong sales continue to the end of October, Mr Rupert said Richemont’s “operating profit for the full-year was expected to be significantly higher than last year”.

Sales at Richemont, as at other luxury goods companies that have outperformed expectations in recent weeks, were supported by “very strong demand in the Asia Pacific and Americas regions”.

Revenues in Asia Pacific rose 48 per cent at actual exchange rates, making it the largest market for Richemont, which has 323 stores in China alone. The region is driving luxury goods sales and cushioning the industry from economic travails in Europe and the US.

Sales in the Americas rose 23 per cent, and in Europe by 20 per cent. Owners of luxury goods stores in Europe report that shoppers from China, Russia, Brazil and Mexico are sustaining sales in the region as local consumers hit by the economic turmoil stay away from stores.

Mr Rupert said Richemont was “seeing increasing tourism but sluggish domestic demand in Europe”.

In another indication of trends in the industry, sales of high-end jewellery, which account for half of Richemont’s turnover, rose faster than sales of watches.

Image: Alfred Dunhill AW11
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Richemont