Luxury brands owner Richemont sees strong earnings despite China weakness

Despite ongoing challenges in the Chinese market, Richemont delivered a December quarterly result that exceeded analysts' expectations. Its stock surged more than 16% to a record high of ₣161.8 (€172.45) in Zurich on Thursday, marking the biggest intraday rise since October 2008.

Richemont has been a standout performer among European luxury goods stocks, with its share price up 21% in 2024. In contrast, other major players such as LVMH and Kering posted negative returns last year, as sluggish consumer demand in China significantly impacted Europe's luxury sector.

A Robust Fiscal Third-Quarter Result

The Swiss luxury goods company reported sales revenue of €6.2bn for the fiscal third quarter of 2025, up 10% year-on-year. Sales in mainland China, Hong Kong, and Macau collectively declined by 18%, leading to a 7% drop in the Asia-Pacific region. However, strong consumer spending in other regions, including Europe, the Americas, Japan, and the Middle East & Africa, have all recorded double-digit growth and offset the weakness in Chinese sales.

Revenue in Europe increased by 19%, driven by higher domestic demand and tourist spending, particularly from North American and Middle Eastern visitors.

In terms of segments, the Group's four Jewellery Maisons - Buccellati, Cartier, Van Cleef & Arpels, and Vhernier - achieved a 14% growth, propelled by their iconic jewellery and watch collections during the festival season.

However, revenue from Specialist Watchmakers fell 8% year-on-year, weighed down by declining sales in the Asia-Pacific region. The company noted that robust growth in the Americas and the Middle East & Africa helped moderate the 16% decline recorded in the first half of the year for this segment.

For the nine months ending 31 December 2024, sales increased by 4% at constant currency, and the net cash position rose to €7.9bn from €6.8bn in 2023.

In the fiscal year 2024, which ended in March, Richemont reported record full-year sales revenue of €20.6bn, up 3% year-on-year. However, quarterly sales declined by 1% year-on-year, reflecting the slowdown in Asia-Pacific spending.

Previous Chairman Johann Rupert noted that weakened Chinese demand significantly impacted the company's performance. Nicolas Bos, CEO of Van Cleef & Arpels by then, who was appointed as Richemont's new CEO in June 2024, is likely to have steered the group's strategic shift toward other regions to mitigate challenges in China.

European luxury stocks jump, driven by Richemont's results

Richemont’s robust earnings boosted optimism in Europe's luxury goods sector, with the Euro Stoxx 600 Luxury Ten Index (STXLUXP) rising nearly 7% on Thursday.

LVMH surged 9%, Hermès gained 4.9%, Christian Dior jumped 8.6%, and Kering climbed 6%. Investors will be watching out for earnings from these big brands later this month. 

Some analysts believe the downturn in luxury goods sales in 2024 was more cyclical than structural. However, others remain cautious about the prolonged weak demand in China, which could continue to affect the sector's performance in 2025.

The Asia-Pacific region, excluding Japan, accounts for approximately 30% of European luxury goods sales revenue, with China making up a significant share of that figure. Hence, brands with a heavier reliance on Chinese consumption may face ongoing challenges in 2025.