January 18, 2010 / 6:34 AM / 8 years ago

UPDATE 3-Richemont Q3 sales shine as rich spend again

* Richemont Q3 sales rise 2 pct to 1.585 bln euros

* Average estimate in Reuters poll was 1.475 bln euros

* Asia-Pacific region performed best during the quarter

* Shares 2 pct higher, outperform index

(Adds shares, analyst comment)

By Katie Reid

ZURICH, Jan 18 (Reuters) - Richemont CFR.VX, the group behind Cartier watches and Chloe handbags, posted forecast-beating sales over the Christmas period, adding to signs shoppers are splashing out again on pricey treats.

Booming sales in the Asia-Pacific region led the surprise positive improvement, prompting some analysts to revise upwards earnings estimates for the full year and adding fuel to a rally in Richemont’s already buoyant shares. Sales rose 2 percent in the third quarter at actual exchange rates, or 7 percent when stripping out currency fluctuations, to 1.585 billion euros ($2.29 billion), beating even the highest estimate in a Reuters poll. [ID:nLDE60C1HD]

“On balance, (Richemont gave) a strong trading update and should be able to sustain its positive earnings momentum, now fuelled by improving top line momentum,” analysts at Credit Suisse said in a note.

At 0815 GMT, the group’s shares, which gained 71 percent in 2009, were trading 2.3 percent higher, outperforming a 0.9 percent rise in the DJ Stoxx European personal and household goods index .SXQP.

“The improvement in trading is welcome in the context of a generally difficult economic environment,” the world’s second largest luxury goods player said on Monday.

But the group cautioned that the figures should be seen in the context of 2008’s weak comparison base.


The Asia-Pacific region accounted for around 31 percent of Richemont’s group sales during the quarter and sales there grew 25 percent at actual rates, the group said.

“Forget Japan, China is the new driver of the luxury goods industry. Renewed strength in the U.S. is also reassuring. I was surprised at the strength in watches pointing to restocking coming through -- the recession is over for the watch industry,” Kepler Capital Markets analyst Jon Cox said.

Richemont is well placed to benefit from growing prosperity in Asia and in particular China, which is estimated to already have over 340,000 millionaires, thanks to its Cartier jewellery and high-end watches.

The group’s upbeat figures come just days after Tiffany & Co (TIF.N) said its profits should beat expectations after a surge in holiday sales. [ID:nN12194045]

Recent Swiss watch export data has also signalled the beleaguered sector may be emerging from its sharpest drop in demand in some 20 years as retailers start to replenish their stocks and consumer sentiment brightens. [ID:nLDE5BL08M]

The luxury goods industry has been grappling with weak consumer sentiment and high-end watches and jewellery have been particularly hard hit as the wealthy have spent less on treats.

Richemont, which is controlled by South Africa’s Rupert family, trades at 19 times expected 2011 earnings, while world-leader LVMH (LVMH.PA), trades at 19.4 times 2010 earnings.

“Richemont could emerge from the recessionary cycle in a much stronger competitive position,” said Citi analyst Thomas Chauvet.

“We believe that its strong brand portfolio, high emerging markets exposure, solid balance sheet and improving free cash flow, and tighter capital discipline/cost control make the company’s profile and medium-term earnings outlook attractive,” Chauvet said.

Analysts had expected Richemont, whose watch brands include top-end names such as Piaget, Vacheron Constantin and Jaeger-LeCoultre to post sales of 1.475 billion euros in the third quarter. ($1=.6931 Euro) (Reporting by Katie Reid; Editing by Will Waterman and Jon Loades-Carter)

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