Richemont, the Swiss luxury group, said that it expects its annual net profits to rise about 30 per cent, countering concerns that a slowdown in Asian demand could curtail the recent success of luxury goods companies.
The voracious appetite of Asia’s nouveaux riches for upmarket goods has been an important factor behind the strong performance of luxury goods companies, particularly Swiss watchmakers, in recent years.
However, since the autumn, Swiss watch exports have started to fall, as a general slowing of Chinese economic growth has coincided with a sharp crackdown by president Xi Jinping on the custom of gifting luxury items, such as watches, which is widespread in Chinese business circles.
Swiss watch exports were up 1 per cent year-on-year in March, but have oscillated sharply in recent months, having fallen 3 per cent in February, risen 11 per cent in January and fallen 6 per cent in December.
In Asia, the picture is even less encouraging, with exports of Swiss watches to China down 31 per cent year-on-year in March, while exports to greater China were down 16 per cent, a fall described by Thomas Chauvet, an analyst at Citi, as “one of the worst monthly performances in greater China for over three years”.
However, despite deteriorating conditions, Richemont, which includes Piaget and Jaeger-LeCoultre, said that in the year to March 31, sales were up 14 per cent on a year earlier, while operating profit was likely to increase by 18 per cent.
In the year to March 31 2012, the company recorded sales of €8.87bn and operating profits of €2.04bn. Net profits came in at €1.54bn.
Richemont said this year’s unexpectedly sharp rise in net profits – which, as required by Swiss stock exchange rules, prompted today’s market update – had been driven by favourable currency movements.
However, the company still grew at a decent pace once exchange rate fluctuations have been taken into account. In constant currency terms, sales were up 9 per cent on a year earlier.
Richemont is due to report detailed full-year results on May 16, and gave no details on its expectations for the coming year. However, Nick Hayek, the chief executive of Swatch, said in February that he expected the Swiss watch industry to grow between 5 and 10 per cent this year.
Shares in Richemont were up 6.31 per cent at SFr72.45 against a rising index in midday trading in Zurich.