Swiss luxury group Richemont reported weaker than expected quarterly sales over the crucial Christmas shopping season following a Covid-19 surge in China that slashed customer demand.
The Cartier-owner said sales in China fell 24 per cent in the three months to December after China abruptly ended its contentious “zero-Covid” policy, which led to soaring infection rates and widespread disruption.
Strong demand in Japan and Europe was not enough to offset the hit. High-end watch sales also dropped but the company said that sales had improved in January.
Group revenue rose by 5 per cent once currency effects were stripped out and 8 per cent on a reported basis to reach €5.4bn, which was lower than the €5.7bn forecast by analysts.
China is the world’s second biggest market for luxury goods and, although the initial lifting of Covid restrictions caused volatility, the easing of controls is expected to boost sales this year.
Shares in Richemont have risen about 11 per cent since early December, while sector leader LVMH is up 10 per cent and Hermes 6 per cent.
“This is clearly a transition quarter, with a massive impact from zero-Covid,” Bernstein analyst Luca Solca wrote in a note. “The key drivers in fiscal year 2023 remain the magnitude of Chinese spend rebound and the moderation of western luxury spend.”