A quarterly sales jump at Compagnie Financiere Richemont (CFR.S) is getting disheartened luxury investors excited again. Shares in the Cartier owner rose 9% after the $72 billion Swiss-listed company said on Thursday that revenue in mainland China rose 25% in the three months to December, helping to lift total sales by 4% to 5.6 billion euros. Richemont’s better-than-expected results, less than a week after a profit warning from Burberry (BRBY.L), came as a relief.
Yet the road to full sector recovery may still be long. Shares in Watches of Switzerland (WOSG.L), which sells pricey timepieces including from Cartier itself, tumbled 27% after the company slashed its annual revenue and profit margin forecasts. Also, Apple’s (AAPL.O) decision to cut prices by 15% in China suggests consumer demand there is still fragile. Even after today’s share rally, at 16.5 times its earnings for the next 12 months, Richemont is trading at a 23% discount to its historical average of 21.5 times and at a 35% discount to the average for large sector players LVMH (LVMH.PA), Hermès International (HRMS.PA) and Kering (PRTP.PA), according to Breakingviews calculations on JPMorgan estimates and LSEG data. With the recovery still looking shabby, investors need to perfect the art of stock-picking. (By Lisa Jucca)
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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own)
