Richemont must not lose sight of Europe

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Analyst warns luxury group against too heavy a focus on Asia.

Retail analyst Verdict has warned luxury group Richemont that it should not lose sight of the Europen market as it makes inroads into the Asia-Pacific region.

Richemont presented a buoyant update for the six months to September 30 last week with sales increases of 37 percent and operating profit up 95 percent. Results showed that Europe continues to be Richemont’s core market, accounting for 38 percent of overall sales and showing an uplift of 27 percent but that the Asia-Pacific region followed closely behind, showing a sales uplift of 50 percent in the period and now accounting for 36 percent of overall sales.

Verdict retail analyst Kate Ormrod said: “With a flurry of positive financial results coming from Asia-Pacific, luxury players are excited by the prospects in the region, particularly China, and like others, Richemont has been keen to pursue growth in the market. The company has continued to expand its distribution network in the region, with brands such as Cartier, IWC and Alfred Dunhill opening new stores.

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“The opportunity in China is undeniable, but Richemont and others must not lose sight of Europe where the luxury market is expected to grow in excess of 5 percent in 2010. For Richemont this region accounts for over 40 percent of its sales. Although this is three times smaller than the expected growth of the Asia-Pacific region, excluding Japan, consumer expenditure is predicted to return to pre-recessionary levels in Europe. The company can look forward to its best year ever with FY11 sales forecasted to pass the €6 billion mark.”

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