Richmont sank after the Swiss watch and jewelry maker hit Russia and China and predicted rocky times ahead.
Chairman Johan Rupert said on Friday, “Even though the worst situation in Covid is behind us, we are facing a global environment in which we have been the most volatile for many years. We are facing turbulent times ahead.”
Shares have fallen nearly 12%, losing nearly a third of their value this year.
The comments raise questions about luxury demand, which has been encouraged by wealthy consumers who are more secure from the effects of lockdowns and the cost of living. This is despite the challenges posed by the war in Ukraine, the lockdown in China, massive inflation and the recent collapse of the stock market. Earlier this week, Barberry Group plc said profitability had peaked in eight years as UK trenchcoat makers benefited from efforts to further monopolize its brand.
The chairman told reporters in a call that his “gut feeling” was that the Chinese economy would suffer longer than most people expected and that the country’s return would be slower than others. About 40% of Richmont’s stores in that market are currently closed. China could face a “recurrence of 2020” as the Kovid transition accelerates, says Cartier CEO Cyril Vigneron.
“The country is going to take an economic hit,” Richemont said. “There will be a temporary contraction.”
The risk of political polarization dampens the “feeling-good factor” that drives luxury spending, Rupert said. Also, inflation could lead to political protests in some countries, he said.
“I’m worried about the food crisis,” said the 71-year-old former South African investment banker. “It simply came to our notice then. When there is no bread, people riot. ”
Richemont says suspending its business in Russia has cut off profits by 168 million euros. Executives have confirmed that some of its products have been confiscated in Russia, and say financial charges cover its risks in the county. The company ended the year with 5.3 billion euros in cash, which Rupert said was a “source of energy” as market conditions worsened.
Operating revenue fell short of analysts’ estimates of 3.39 billion euros ($ 3.6 billion), although full-year profits more than doubled as Cartier’s jewelry and Vacheron Konstantin Swiss watchmaker benefited from a record bounceback from the epidemic.
“Caution is the key,” said Burkhardt Grund, chief financial officer.
Richmont has also declared a special dividend.
The company added that negotiations with partners for a luxurious e-commerce partnership are ongoing, but the process is protracted because it is complex. The agency said it was “looking forward to ending things in the near future.”
When asked about the acquisition, the chairman, whose nickname is Rupert the Bear, said, “Let’s see if things calm down and prices return to reality.
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