Swiss luxury goods makers Compagnie Financiere Richemont SA and Swatch Group AG Friday said sales are beginning to rebound amid improving demand, particularly in Asian emerging markets, adding new vigor to industry hopes that well-heeled consumers may return to the shops ahead of Christmas, Dow Jones Newswires reported.
Their statements echo similar messages from high-end consumer goods companies such as, L’Oreal SA, LVMH Moet Hennessy Louis Vuitton, Bulgari SpA and Burberry Group PLC, which have either positively surprised the markets or have predicted an imminent end to destocking, or sharply falling orders from retailers–a phenomenon that has dogged the industry in the past 12 months, the report said.
Richemont, the Geneva-based owner of jewelry brand Cartier and specialist watchmakers such as Jaeger-LeCoultre, Friday reported a 15% fall in first-half sales to EUR2.38 billion as of Sept. 30. However, the rate of decline has slowed to 10% in October with demand in Asia, except for Japan, even rising 11%, said the report.
Operating profit for the six months to Sept. 30 declined 39% to EUR390 million from CHF635 million, besting market expectations of EUR322 million.
The company, known for conservative outlook statements, said that any recovery will likely be slow. Executive Chairman Johann Rupert decided to assume the additional post of chief executive as of April 2010 to guide the company through the crisis, replacing Norbert Platt who is stepping down for health reasons, said the report.
At the same time, the company seemed remarkably upbeat for the all-important Christmas shopping season. Many retailers’ inventories have already been adjusted, the company said, adding it hopes that Christmas would exceed last year’s level.
Richemont’s Cartier brand, particularly bijoux and bridal jewelry, was among the revenue drivers, posting double-digit growth rates in Asia in October. New product launches such as Vacheron Constantin’s Patrimony collection and Jaeger-Le Coultre’s “Hybris Mechanica a Grande Sonnerie” were also successful, the company said.
Analysts welcomed the results, spotting first signs of an improvement after several quarters of massive declines. Bank Vontobel upgraded Richemont to buy from hold on an improved earnings outlook, the report said.
Swiss rival Swatch Group AG, the worlds’ biggest watchmaker in terms of sales, also said demand is picking up.
“We are seeing a year-on-year improvement since August in local currency terms, and we are gaining market share. “Of course, the dollar is something of a worry,” Chief Executive Officer Nick Hayek told Dow Jones Newswires on Friday, referring to the recent slide of the dollar against the Swiss franc, the company’s reporting currency.
Swatch Group, which sells high-end watches such as Breguet and Omega but also the basic Swatch watch, derives strength from its broad portfolio but also the fact that it hasn’t stopped investing into its brands, Hayek said.
Universo, Swatch Group’s watch hands maker, returned to full employment in November, abandoning original plans to put its 240 employees on a short-time labor regime from September through December, Hayek added.
Credit Suisse said Richemont’s results, particularly the 11% rise in Asian sales in October, bode well for Swatch Group.
Swatch has a strong foothold in Asia with that region accounting for around 30%-35% of group turnover in 2008 without including Japan, analyst Patrick Jnglin said.
Swatch has a relatively low exposure to the problematic US market, with less than 10% of sales generated there, Jnglin said. He has a buy rating on Swatch Group.
Some other high-profile consumer goods companies have recently reported better-than-expected sales.
Italian luxury jeweler Bulgari Thurday said it returned to a net profit in the third quarter after two quarters of losses, signaling that the slump in high-end jewelry sales may be ending.
French cosmetics giant L’Oreal on Nov. 5 voiced cautious optimism after it met expectations with a 0.7% fall in third-quarter sales, with like-for-like sales rising 0.8%, the group’s first positive result this year. L’Oreal said it expects stronger growth in
the fourth quarter.
In October, LVMH Moet Hennessy Louis Vuitton, the world’s biggest luxury maker in terms of sales with a product range spanning perfumes, drinks and leather goods, reported a 0.6% decline in third-quarter sales to EUR4.14 billion but said the destocking trend may be drawing to a close, said the report.
And in Mid-October, U.K. fashion house Burberry Group surprised markets with a 4.6% rise in fiscal second-quarter sales to GBP343 million, benefiting from higher turnover at its own stores.
The global luxury goods market is expected to contract by 8% in 2009, according to a recent estimate by consultants Bain & Co. That’s an improvement on Bain’s previous forecast of a 10% fall, due to a market stabilization foreseen in the second half.
Source: www.polishedprices.com
