Money, money, money Richemont coins it amid pent-up demand

● Luxury goods group Richemont, which reported a double-digit increase in sales in the three months to December, is likely to maintain this growth momentum thanks to pent-up demand from high-end consumers and the opening up of international travel, analysts said this week.

Richemont, part of the Rupert family’s stable, said revenue rose 32%, driven by high-end luxury fashion from Alaïa, Peter Millar and Chloe. Sales grew across all regions, channels and business areas, and exceeded pre-Covid levels.

“I think the trend will continue for 2022 as there is still a lot of pent-up demand from consumers,” said Vestact portfolio manager Michael Treherne. “A further tailwind will be when international travel opens up more. Richemont used to get a significant amount of revenue from tourists buying luxury goods while travelling.”

Chris Gilmour, independent investment analyst with Salmour Research, said there is enormous pent-up demand as people come out of lockdown. “Luxury goods is a prime area they will continue to spend money on.”

Richemont growth was led by the Americas, with sales up 55%, followed by Europe, and the Middle East and Africa, where sales grew 42% and 30% respectively.

Bloomberg reported that Burberry Group forecast 35% earnings growth this year, signalling that the luxury-goods market is thriving again.

Demand for jewellery, timepieces and fashion items is rebounding as vaccination rates across the world increase and people socialise and travel more. Prada said on Tuesday its sales topped pre-Covid levels.

Though the growth trajectory will continue, Treherne cautioned that there is a risk that the Chinese government will discourage the flaunting of wealth. “A push to have a more modest society would hurt sales in China, a key region for the group,” he said.

Asked if interest rates would put a damper on spending, Gilmour said it would not make a dent on sales. “In fact, wealthy people usually have lots of cash earning interest, so higher interest rates will be good for them. Thus top-end lux companies will do better than the lower end. Rolex and Cartier will do better than Tag Heuer and Breitling, if I can put it that way.”

But Treherne said: “The bigger question is what will sales do post-2022, when the world mostly returns to normal? Will all the pent-up spending slow down? I’m not sure.”