Sales and profits at luxury goods conglomerate Richemont suffered a blow in the first half of 2020 due to the ongoing global pandemic. However, the company has observed signs of recovery in the second quarter.

Richemont, the parent company of renowned brands like Cartier, Chloé, and Net-A-Porter, reported a 26% decrease in sales from March to September, equating to €5.478 billion. At constant exchange rates, the decline was slightly lower at 25%. The group’s operating profit also plummeted by 61% to €452 million, with a net profit decrease of 82% to €159 million.

The first quarter witnessed a substantial 47% drop in revenue for Richemont, but, in line with other luxury companies, the second quarter displayed a stronger performance. Sales between July and September decreased by only 5% at actual exchange rates and 2% at constant exchange rates.

While the company experienced significant declines in sales across its directly operated boutiques and wholesale channels worldwide, China became a standout performer with a 78% increase in sales during the first half of the year. This growth helped offset double-digit declines in Europe, the Americas, and Japan, all of which experienced significant decreases. Europe took the hardest hit with sales declining by 44%. The closure of stores, halted international tourism, and reduced local demand negatively impacted all markets and business sectors.

Richemont’s online sales were not as severely affected as its retail and wholesale channels. The Online Distributors division, which includes platforms like Net-A-Porter and Yoox, saw a 21% decrease in sales, amounting to €934 million. However, compared to its retail and wholesale sales, the division performed more robustly with just a 4% decline recorded. Some of Richemont’s brands even achieved triple-digit growth in e-commerce sales. Overall, online retail, including the Online Distributors segment, contributed to 22% of group sales, up from 17% the previous year.

Richemont’s Jewellery Maisons, which include Cartier and Van Cleef & Arpels, displayed better resilience with a 4% sales growth in the second quarter. However, Specialist Watchmakers faced a more significant decline in sales due to their reliance on multi-brand retail partners.

Despite the challenges brought about by the pandemic, Richemont has made notable progress in its digital endeavors. The company is currently transitioning Net-A-Porter’s platform and has taken charge of the e-commerce operations of Montblanc and Cartier. Its joint venture with Alibaba, Feng Mao, has also experienced positive development, with eight leading Maisons debuting flagship stores on Tmall Luxury Pavilion.

Chairman Johann Rupert acknowledged the impact of the pandemic but highlighted the company’s commitment to adapt and enhance its digital presence. Rupert expressed optimism regarding the initial outcomes of the Pavilion flagship stores and the opportunities they present in reaching a wider customer base in China’s lower-tier cities.

While Richemont faced setbacks in sales and profits in the first half of 2020, the company’s resilience, strategic investments in digital infrastructure, and emphasis on online retail have begun paying off. As the luxury industry adjusts to the new normal, Richemont is positioning itself for growth and recovery.

Links:
1. Reuters – Richemont Article
2. The Wall Street Journal – Luxury Goods Recovery