Shares in Richemont led Europe’s luxury goods sector lower on Friday, after the Swiss-based group said geopolitical angst and a weakening European economy had delivered lower than expected first-half profits.
Zurich-listed Richemont
CFR,
whose brands include Cartier jewellery and Roger Dubuis watches, revealed sales in the six months to the end of September rose by 6% to €10.2 billion ($10.9 billion), less than the €10.3 billion expected by analysts, while profit of €1.51 billion was below the €2.17 billion forecast.
Soft demand in Europe did most of the damage, with sales falling 1% in the second quarter, though the Americas rose 4% and Asia-Pacific was up 8%.
“The period under review started strongly, beyond our expectations,” said Johann Rupert, Richemont chairman. “However, growth eased in the second quarter as inflationary pressure, slowing economic growth and geopolitical tensions began to affect customer sentiment.”
Richemont becomes the latest luxury goods group to warn that demand is slowing as the post-COVID bounce subsides and consumers struggle amid stuttering global economic growth and higher interest rates.
Last month LVMH
MC,
Europe’s biggest luxury group, whose brands include Dior and Givenchy, said weakness in the U.S. had contributed to sales growth falling from 17% to 9% from the previous quarter.
Richemont stock fell more than 5% on Friday, taking its losses over the last three months to 18%. LVMH shares, which in May hit a record high above €900, fell more than 3% to trade below €700. Luxury peers Kering
KER,
and Hermes
RMS,
lost 3.4% and 1.7% respectively.
The weakness in luxury left the Paris CAC 40
FR:PX1
down 0.8%. Meanwhile, a poor performance from Wall Street the day before pushed Frankfurt’s DAX
DX:DAX
down 0.6%, while London’s FTSE 100
UK:UKX
shed 1.3%.
The U.K. market’s underperformance came as global economic growth concerns hurt miners and shares in Diageo
DGE,
the global drinks company that owns Guinness and Johnnie Walker, slumped more than 15% on signs of weaker sales in South America.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, noted that the region “only makes up a relatively small portion of Diageo’s whole, but the extent of declines means expectations have materially changed at the group level.”
“Diageo has long been a favored steady-Eddie thanks to its seemingly impenetrable brand power and dividend paying ability, and there will now be concerns that the change in appetites could translate to other, larger markets,” she added.
Meanwhile, the euro
EURUSD,
was up 0.1% to $$1.0695 and German 2-year bund yields
BX:TMBMKDE-02Y
rose 3.8 basis points to 3.050% after European Central Bank President Christine Lagarde told the Financial Times that the eurozone monetary guardian will not begin cutting rates for at least “the next couple of quarters” as its strives to return inflation to its 2% target.
Read the full article here
