Richemont tops forecasts as Chinese tourists carry on spending

While economic growth may be cooling at home, wealthy Chinese tourists are still snapping up expensive watches and jewellery on their travels, helping Swiss luxury goods group Richemont to beat sales forecasts.

The maker of Cartier watches said on Wednesday sales rose 4 percent at constant currencies in the five months to August, twice as much as even the most optimistic forecast in a Reuters poll of analysts.

Sales leapt 28 percent in Europe and 48 percent in Japan, driven mainly by spending from Chinese travellers, more than offsetting an 18 percent decline in the Asia-Pacific as well as weakness in the Americas and Middle East.

Luxury goods stocks have been hit hard by signs of a sharply slowing Chinese economy, as well as a crackdown in the country on conspicuous consumption. A recent devaluation in the Chinese yuan has also raised concerns about a possible dip in tourism.

So following the strong results, Richemont shares were up 6.5 percent at 64.99 Swiss francs at 0945 GMT, on track for their best daily performance in two years.

As the first luxury goods group to post results for July and August, its performance also helped to lift rival stocks such as Hermes, Swatch and Louis Vuitton Moet Hennessy (LVMH) between 3 and 6 percent.

"We already have some confirmation here in Switzerland, but we did not know that for all of Europe, July and August were very much driven by Chinese tourism," Vontobel analyst Rene Weber said.

The chief executive of Swiss watchmaker Swatch had already cited strong sales to Chinese customers.


JEWELLERY

Richemont, the world's second-biggest luxury group by sales behind LVMH, makes about 38 percent of its revenues in Europe, according to Vontobel analysts, which they said put it in a good position to capitalise on improving demand on that continent.

U.S. jeweller Tiffany, with only 12 percent exposure to Europe, last month forecast a surprise earnings decline after a strong dollar and new product costs contributed to a drop in quarterly earnings.

Richemont said it had returned to growth in China, including a double-digit percentage rise in sales at its stores, though sales in Hong Kong and Macau remained down on last year.

"The results highlighted the strength of Richemont in the jewellery product category and the strength of Richemont brands, especially Cartier and Van Cleef & Arpels," said Bernstein analyst Mario Ortelli, who has an outperform rating on the stock.

These brands were the two most important in the jewellery market, which is less crowded and also growing faster than other luxury goods categories, he said.