Richemont Drops on Signs Luxury Demand Falling in US, China

Richemont led luxury-goods stocks lower amid concerns that demand in the US and China, two of the biggest markets for the industry, is starting to sputter.

(Bloomberg) — Richemont led luxury-goods stocks lower amid concerns that demand in the US and China, two of the biggest markets for the industry, is starting to sputter.

The Swiss owner of Cartier reported a surprise drop in revenue from the Americas in the three months through June. While Richemont’s sales from Asia rose sharply, China reported slower-than-expected economic growth Monday, signaling signs of a possible pullback in consumer spending.

Richemont fell as much as 10%, the steepest intraday decline in more than year. LVMH dropped as much as 5% and Hermes fell as much as 5.3%.

The luxury-goods industry has been counting on a rebound in China as that country’s reopening would make up for weakness in the US market. Now Richemont and its peers are contending with the prospect that its two main growth motors are weakening. Last week, Burberry Group Plc said the low end of the luxury market in the US softened.

Richemont Chairman Johann Rupert said in May that the US market was at risk of a downturn, predicting the country will go through a credit contraction.

Sales improved in June in the US and Europe compared to May, while sales in greater China sales rose by 20%, Citi analyst Thomas Chauvet said in a report following an analyst call with Chief Financial Officer Burkhart Grund. He added that Grund said there was no change to the company’s full-year outlook.

Cartier raised prices by mid-single digits in April with some of Richemont’s watch brands also taking price increases, Chauvet wrote.

Read more: China’s Growth Disappoints, Fueling Calls for More Stimulus

Richemont reported an overall 19% gain in sales. Jewelery revenue increased 24%, meeting analyst expectations, while its specialist watchmaker division reported sales growth of 10% at constant currencies, slightly below analyst consensus forecasts.

An 11% sales increase in Europe was driven by resilient domestic spending as well as tourism from the US, the Mideast and China.

(Updates with analyst commentary from management call beginning in paragraph 6)

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