By Erin Shea
May 17, 2013
Richemont is attributing its full-year sales increase to demand in China and Asia-Pacific, contributions from currencies and exchange rates and the broad growth from its brands across all regions.
Luxury conglomerate Richemont reported a 14 percent increase in annual sales to approximately $13 billion in 2012, compared to last year’s sales of $11.4 billion.
Richemont also reported that its profits for the year are up 30 percent to $2.6 billion from $2 billion in the previous year, much of which can be attributed to the sales in Asia-Pacific. The conglomerate released its results May 16 for the fiscal year that ended March 31.
“The Chinese and the Asians have a very healthy appetite for jewelry,” said Milton Pedraza, CEO of The Luxury Institute, New York.
“I think that ready-to-wear products may be oversaturated [in Asia], and handbags may be oversaturated, so watches and jewelry tend to be valuable,” he said.
“There are some companies in luxury that continue to grow, despite the global economy.”
Mr. Pedraza is not affiliated with Richemont, but agreed to comment as an industry expert.
Richemont, which was not able to comment directly, owns a number of luxury brands including Vacheron Constantin, Jaeger-LeCoultre, Baume & Mercier, A. Lange & Söhne, Cartier, IWC, Piaget, Alfred Dunhill, Van Cleef & Arpels, Montblanc, Chloé and Roger Dubuis.
Richemont attributes its sales results to an increased demand in China and Asia-Pacific, contributions from currencies and exchange rates and the broad growth from its brands across all regions.
The company said that it works on a long-term basis of benefiting from the prestige and heritage of its brands, which will continue in the future.
However in the short-term, Richemont said that economic troubles may impact consumer confidence in some markets. Overall, the conglomerate is cautiously optimistic about the future.
During this past fiscal year, Richemont reported that Asia-Pacific accounted for the majority of its sales, with 41 percent of the group’s total sales coming from that area. Hong Kong and mainland China are its two largest markets.
Europe, including the Middle East and Africa, was responsible for 36 percent of Richemont’s overall sales.The conglomerate says this area’s growth was a result of demands from tourists.The Americas region had a third consecutive year of double-digit growth. This year, it accounted for 15 percent of group sales.Compared to other regions, Asia-Pacific is the area that is leading Richemont’s growth.
“Asia-Pacific is still a vibrant part of the world and there are some companies that are doing well there,” Mr. Pedraza said.
“Some brands are doing a fantastic job in that area,” he said. “Richemont is doing a fantastic job.”
Retail v. wholesale
Another aspect responsible for Richemont’s growth is its individual brands’ focus on retail over wholesale.
For the Asia Pacific and Europe, Richemont reports that its brand’s own boutiques had the highest growth rates.
In Asia, the brand boutiques had higher sales growth than the company’s wholesale partners. This is in part due to the expansion of the boutiques in the region.
“Richemont has set out over the last few years to try to keep its own distribution,” Mr. Pedraza said.
“Retail is outselling wholesale, which can help a company grow faster,” he said. “You can have faster growth when you are de-emphasizing wholesale and emphasizing retail.
“Most luxury brands want to control their own distribution. Watch brands tend to be more retail-oriented.”