Swiss luxury group Richemont, owners of brands including Cartier, Piaget and IWC, has reported increased earnings, despite the effects of the COVID-19 pandemic during the final quarter of the reporting year and believes China’s “new retail” will be crucial in future.
The figure of $15.3 billion for the year ending in March was 2% up on the previous year, the group revealed in an earnings call. In the Greater China market, however, the group’s sales of $3.24 billion marked a 6% decline from 2019.
The COVID-19 pandemic and civil unrest in Hong Kong took their toll during the latter part of the year, the company said. Nevertheless, the Asia-Pacific region remains the group’s largest market, and the group’s chairman, Johann Rupert, expressed optimism about the future of “hard luxury” – jewellery and watches – as well as the recovery of the sector in China.
All 462 of the group’s shops in China have now reopened, the group reported, but Rupert singled out online retail for mention, and the group’s joint venture with Alibaba-owned Tmall Luxury Pavilion in China in particular. He said this was introducing Cartier and the other brands to a new generation of shoppers.
“In times when tourist traffic is impacted by concerns over the virus, internet shopping has proven to be a key avenue and will remain key to the growth of our business,” he stated, adding that post-COVID-19, online sales represented the “new retail”, a phrase frequently used by Alibaba.
“New retail … is the operating model we are aiming at,” he explained. “It consists of using big data to intimately know our clients and being able to meet their expectation at any time, anywhere and with any device.
“We are running enormous amounts from our association with Alibaba. And the one thing I requested even throughout the standstill was that we would not cut back on the cost of developing new retail in China.”
Rupert also suggested that fallout of the pandemic may lead to “12, 24, or 36 months of grave economic consequences”.
Earlier this month, consultancy Bain predicted a huge slump in global sales of luxury goods this year of between 25% and 30%.
The COVID-19 pandemic and subsequent lockdowns around the world have kept shoppers out of stores and brought to an abrupt halt a decade of strong growth for luxury brands, it said.
It forecast it would take until 2022-23 for sales to return to 2019 levels. But a rebound of the sector is under way in China, the first country affected by the pandemic and the first to ease its lockdown, Bain said. Some brands were already recording year-on-year sales growth.
Chinese consumers made up 35% of the world’s luxury market in 2019, Bain said, and they are expected to account for almost half of all sales in the luxury sector by 2025.
Sourced from Seeking Alpha, Bain & Co; additional content by WARC staff