Despite geopolitical volatility, economic uncertainty and high inflation, the luxury goods sector is fat and flourishing. That’s certainly great news for Richemont shareholders. Shares jumped by 9.5% on Friday morning after the Swiss luxury goods group reported outstanding results for the year ending 31 March 2023.

The group, which owns brands such as Cartier, Mont Blanc, Piaget and Van Cleef & Arpels, added more than R150-billion in shareholder value as it reported that demand for luxury remained robust.

Sales are up 19% and reached €20-billion (R420-billion) in the year to end-March, it said, with final quarter sales bouncing nicely after Covid restrictions were lifted in China.

Richemont’s operating profits rose by more than a third to about €5-billion, though profits were under pressure from a €3.4-billion write-down of e-commerce platform Yoox-Net-A-Porter’s (YNAP) net assets.

YNAP, an online sales platform for luxury goods acquired by the group in 2015, has failed to meet expectations. On Friday, Richemont said the first phase of the transaction to sell off 50.3% of the platform would be concluded by the end of 2023.

Richemont’s net cash remained solid, rising 25% to about €6.5 billion this year.

The group has raised its ordinary A share dividends by 11% to 2.5CHF (Swiss francs) and declared a special dividend of 1CHF per A share.

The company said on Friday that while growth had resumed in Asia Pacific, with sales up 6% at actual rates, Japan and Europe had seen double-digit increases.

In the Americas – Richemont’s second-biggest regional market – sales were up 27% for the year. Europe saw a 30% increase in sales, with the performance of France, Italy and Switzerland particularly noteworthy. Japan reported the strongest regional performance for the year, with sales up by 45% driven by solid domestic sales and the return of inbound tourism. In the Middle East and Africa, sales rose by 24%.

• Group sales are at an all-time high of €19.95-billion.

• Operating profit was up 34% to €5-billion, also a record high.

Jewellery Maisons generated 21% sales growth, specialist watchmakers grew sales by 13%, while “other” business areas (fashion and accessories) delivered strong sales growth.

The group has a solid net cash position of €6.5-billion

Commenting on the results, Richemont chairperson Johann Rupert said all business areas had generated higher sales and profits. “The group has drawn on the strength of its maisons and the resilience of luxury consumers in an environment characterised by geopolitical volatility, economic uncertainty and high inflation.”

Richemont’s chairman Johann Rupert. (Photo: Gallo Images / Sunday Times / Esa Alexander)

He said during the year under review, sales attained an all-time high of about €20-billion, which is a 19% year-on-year increase, strongly led by Japan and Europe, closely followed by the Americas.

Based upon the strong performance of the year, significant cash flow generation and a solid net cash position at the end of March 2023, the board proposed to pay an ordinary dividend of 2.50CHF per 1 A share (and 0.25CHF per ‘B’ shares), up by 11% over the previous year as well as a special dividend of 1CHF per ‘A’ share (and CHF 0.10 ‘B’ shares), subject to shareholders’ approval at the AGM on 6 September 2023.

Rupert said that on 31 March 2024, the board would bid farewell to two long-serving and valued non-executive directors – Guillaume Pictet and Jean-Blaise Eckert. Other non-executive directors, Clay Brendish and Maria Ramos, will also step down from the board on 31 March 2025 after 14 and 13 years of service, respectively.

The latest Bain-Altagamma Luxury Goods Worldwide Market study predicts that China may represent about 40% of global luxury purchases by 2030. It said that after a severe contraction in 2020 due to the Covid-19 pandemic, the market grew back to €1.15-trillion in 2021. In 2022, the market surprised everyone by growing about 20%.

The People’s Republic has been one of the biggest drivers of luxury spending in the past decade, where GDP per capita has risen more than tenfold in two decades.

Since China began to reform its economy in 1978, GDP growth has averaged more than 9% a year, and more than 800 million people have lifted themselves out of poverty, according to the World Bank. The country now has an enormous middle and upper class that enjoy the finer things in life.

The Bain-Altagamma report said although there would never be “another China” in terms of growth contribution to the industry, new markets such as India and emerging Southeast Asian and African countries had significant potential. Among the rising stars, India stands out: its luxury market could expand by 3.5 times by 2030.

Statista estimates the luxury goods market in South Africa is worth $783.8-million.

Some luxury goods houses, such as Chanel, Dior and Hermès, prefer to increase prices instead of driving more volume. About 70% of the growth in leather luxury goods was driven by price increases in 2022, compared with 50% in 2019, reported the Financial Times, as high-income and price-insensitive shoppers remain luxury’s top spenders. BM/DM