Johann Rupert, chair of luxury goods retailer Richemont, says he expects Chinese consumers to keep spending on fine goods, saying they work hard, are smart, study for science degrees and do not attend campuses run by “woke students”.
“You have to look at China versus where we live. Why do we not expect them to continue to be successful?”
Rupert was speaking on a media call on Friday after the release of Richemont’s half-year earnings to end-September. The group, which owns brands such as Cartier, Dunhill, Chloé and watchmaker Vacheron Constantin, reported a drop in spending in the Americas (in actual exchange rates) and weakening demand in Europe as rising interest rates reduce consumer spending.
However, Asia-Pacific, which includes Hong Kong, Thailand, China and Taiwan, reported a revenue rise of 14% in actual exchange rates, accounting for 42% of group revenue in the review period — the biggest region in terms of Richemont sales.
The fine-goods group ended the half-year with net cash of €5.8bn (about R115.9bn).
Rupert said lower demand for goods in the West was to be expected in response to central banks fighting to stem inflation.
Reuters reports that French rival LVMH last month reported a slowdown in demand for high-end goods in the US and Europe, where rising prices prompted shoppers, especially younger consumers, to cut spending. Rupert said consumer demand fell for all asset classes, including property and cars.
“It’s just the normal supply and demand where after acting recklessly by lowering the cost of capital — to virtually zero, in fact negative — the central banks have now started moving towards real interest rates.”
After acting recklessly central banks are moving towards real interest rates
— Richemont chair Johann Rupert
Richemont has a primary listing on the SIX Swiss stock exchange and a secondary listing on the JSE, offering local investors exposure to offshore markets.
The share price ended 5.43% lower at R2,200 on Friday in response to the group missing expected sales targets.
However, Rupert said its jewellery maison, or division, was taking market share from rivals even as demand for goods reduced.
Asked about the property crisis in China, which has spilt into the general economy, he said people were extrapolating macro events onto Chinese fine-goods consumers and presuming spending would fall.
Instead, Richemont had confidence in the Chinese consumer.
“The picture in China differs [depending on] whom you speak to. We keep on reading about the real estate crisis, but remember that the one-child policy still has an effect on the accumulated wealth of a generation.
“So when two people get married, they carry the hopes of four parents and their eight grandparents. They work hard, they [are] smart. They study STEM [Science technology, engineering and mathematics]. Their campuses are not run by woke students.”
He said Chinese consumers weren’t reckless spenders, “busting their credit cards” or being “overstretched”. They were still scarred from Covid-19 lockdowns.
But when they travel, “their appreciation for fine goods, for quality goods is not abating”. This gave Richemont confidence in the region, said Rupert.
In the period to end-September, the group reported an overall sales rise of 6% at actual exchange rates.
Its jewellery maison reported sales were up 10%, though the watchmaking maison shrank 3%. Sales at the fashion maison fell 1%.
Richemont reported a 3% rise in profit for the period from continuing operations to €2.2bn (about R44bn).
Rupert said Richemont had the balance sheet to support the business as a whole during the slowing in demand in Europe and the Americas.
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