Richemont stock is surging by the most ever. Other luxury plays are jumping too.

MW Richemont stock is surging by the most ever. Other luxury plays are jumping too.

By Steve Goldstein

Despite Chinese sales dropping 18%, Richemont reports 10% increase

The struggling European luxury-goods sector roared to life Thursday after Richemont reported its highest-ever quarterly sales as it blew by analyst estimates.

Richemont, whose brands include Cartier and Montblanc, said fiscal third-quarter ending Dec. 31 sales rose 10% to EUR6.15 billion ($6.3 billion), far ahead of consensus expectations of just 1% growth.

While China is still struggling - sales in mainland China, Hong Kong and Macau slumped 18% - other Asian markets including South Korea thrived, while both domestic demand and tourists from North America and the Middle East sent European sales up by 19%.

Jewellery sales were particularly strong, up 14%, offsetting an 8% decline in watches.

Swiss-listed Richemont (CH:CFR) shares rose as much as 18% in its best day ever, according to FactSet data.

The Richemont news buoyed rivals: shares of Swatch (CH:UHR), Burberry (UK:BRBY), Kering (FR:KER), LVMH Moet Hennessy Louis Vuitton (FR:MC), Moncler (IT:MONC) and Hermes International (FR:RMS)each rallied between 5% and 8%.

A London-listed ETF, the Amundi S&P Global Luxury UCITS ETF UK:LUXG, jumped 4%, after a 2024 when it was basically flat.

"This will add to the debate that the more premium luxury brands are likely to outperform, the luxury slowdown is more cyclical than structural (at least at the high end) and that there is enough growth in the rest of the world to offset China weakness," said Deutsche Bank analysts led by Adam Cochrane.

Bank of America separately published its year-ahead outlook for the luxury sector in which it upgraded LVMH, Richemont and Zegna $(ZGN)$ to buy, downgraded Brunello Cucinelli (IT:BC) and Pandora (DK:PNDORA) to neutral and downgraded Watches of Switzerland (UK:WOSG) and Kering to underperform.

"There is growing risk that 'cyclicality' is slightly more structural, especially if China is a more prolonged recovery or there is a lack of creative newness and brand engagement to drive cultural relevance. At the same time, margins are being protected thanks to lower cost growth and FX," said analysts led by Ashley Wallace.

-Steve Goldstein

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January 16, 2025 09:22 ET (14:22 GMT)

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