Swiss luxury company Richemont faced significant challenges in the first quarter of this year as the Covid-19 pandemic took a toll on its sales. The company’s sales declined by a staggering 47% to €1.933 billion, with double-digit declines observed across all regions, distribution channels, and business areas. Store closures, halted tourism, and subdued consumer sentiment were major factors contributing to this decline.

Despite the overall decline, the Middle East, Africa, and Asia Pacific regions experienced less severe declines compared to other regions. In fact, Asia Pacific witnessed a remarkable 49% sales growth in China. This highlights the increasing importance of China in the luxury sector and emphasizes that it holds the future of the industry.

While physical stores and tourism remain crucial for luxury firms, the pandemic has also underscored the significance of e-commerce. Online sales, excluding the company’s online-only businesses, accounted for 8% of group sales, indicating a growth from the previous year’s 2%. This indicates that the pandemic has accelerated the company’s e-commerce growth as a whole.

Among Richemont’s business areas, its Jewellery Maisons, particularly Cartier, and Online Distributors performed comparatively better than others. The company is anticipating a recovery in the second quarter as most stores and distribution centers have reopened by the end of June. However, ongoing disruptions in global tourism, stores in the Americas, and travel retail continue to pose challenges to business operations.

Taking a closer look at the sales figures, Europe experienced a 59% decline to €436 million, primarily due to the lack of tourism. On the other hand, sales in Asia-Pacific fell by a relatively less concerning 29% to €1.013 billion, largely supported by the growth in China. The Americas witnessed a significant 61% drop to €277 million, while Japan experienced a 64% decline to €112 million. The Middle East and Africa saw a 38% decrease to €155 million, although factors such as the internalization of operations in Saudi Arabia and advanced purchases ahead of the country’s VAT increase partially mitigated this decline.

In terms of sales channels, sales through the Retail channel declined by 43% to €1.052 billion, primarily due to store closures, limited tourism, and weak demand. However, China and South Korea emerged as bright spots. Online sales witnessed a comparatively smaller drop of 22% to €506 million, with China experiencing significant triple-digit growth in e-commerce. The decline in online sales would have been less significant if businesses like Net-A-Porter and Yoox had not temporarily closed their fulfillment centers. Wholesale sales were severely impacted, with a 65% decline to €435 million, influenced by the same factors as the Retail channel.

The Jewellery Maisons segment demonstrated a relatively more resilient performance, with a 41% decline in sales to €1.083 billion. China played a crucial role in driving sales growth, with a 68% increase attributed to increased online and offline retail spending and the newly opened Cartier flagship store on Tmall Luxury Pavilion. Online Distributors witnessed a 42% decrease in sales to €365 million.

However, other business units experienced more substantial declines. Specialist Watchmakers saw a 56% decline in sales to €359 million, while the Other segment, which includes fashion brands like Chloé and Dunhill, reported a 59% decrease to €204 million. The company did not provide specific information about individual brand performances, but stated that the segment as a whole was impacted by temporary store and distribution center closures.

Overall, Richemont’s first-quarter results reflect the immense challenges posed by the Covid-19 pandemic. While some regions and business areas fared better than others, the company anticipates a gradual recovery in the coming months as the situation improves globally.

Useful links:
Reuters: Richemont’s Q1 Sales Plunge by 47% due to Covid-19
Financial Times: Richemont Suffers 47% Sales Drop in Q1