Richemont sees shares dive 14% on fears over slowdown in China

Cartier parent also takes financial hit in Russia and fails to strike deal for online unit

Richemont shares plunged the most in more than two years after the Cartier owner said Chinese demand will be slower to recover than expected, clouding prospects for a market that's fuelled the luxury industry's recent growth.

The Swiss watch and jewellery maker – parent group of Cartier – suffered a financial hit in Russia, failed to strike a deal for its online sales unit and forecast rocky times ahead, particularly in the key market of China. The stock fell as much as 14 per cent Friday, losing almost a third of its value this year.

"Even if the worst of Covid is hopefully behind us, we face a global environment which is the most unsettled we have experienced for a number of years," chairman Johann Rupert said Friday. "We face volatile times ahead."

The comments raise questions about luxury demand, which has been buoyed by rich consumers who are more insulated from the effects of lockdowns and the cost-of-living crisis. That's despite challenges including the war in Ukraine, lockdowns in China, rampant inflation and recent stock market declines.

Earlier this week, Burberry Group said profitability reached the highest level in eight years as the UK trenchcoat maker benefited from efforts to make its brand more exclusive.

The chairman said on a call with reporters that his "gut feeling" is that the Chinese economy is going to suffer longer than most people think and that the country's rebound will be slower than that of others. About 40 per cent of Richemont's stores in that market are currently closed. China may face a "repeat of 2020" as Covid infections accelerate, Cartier chief executive Cyrille Vigneron said.

Political polarization risks damping the “feel-good factor” that drives luxury consumption, Rupert said. Also, inflation may lead to political demonstrations in some countries, he said.

Richemont said the suspension of its business in Russia knocked €168 million off profit. Executives confirmed some of its products were seized in Russia and said the financial charges taken cover its risks in the county. The company ended the year with €5.3 billion euros in cash, which Mr Rupert said is a “source of strength” as market conditions worsen.

Operating income missed analysts' estimates at €3.39 billion, though full-year profit more than doubled as the maker of Cartier jewellery and Vacheron Constantin Swiss watches benefited from record sales growth in a bounceback from the pandemic. – Bloomberg