Burberry, Richemont say China luxury sales rebound

Zurich - Burberry Group and Richemont [JSE:CFR] said the luxury-goods market returned to growth in mainland China at the end of last year, a balm for an industry suffering from a slump in Hong Kong.

The British trenchcoat maker said on Thursday that sales in China returned to growth in the three months through December while Hong Kong revenue dropped more than 20%.

The improvement helped Richemont, the maker of Cartier jewelry, report a 9% sales decline for the Asia Pacific region, compared with the 16% drop analysts had expected.

Burberry shares rose as much as 5.5% in London.

The reports may assuage concern that the Chinese market will worsen in the upcoming year of the monkey as as the country’s economic growth weakens to the slowest pace in two decades.

Chinese consumers accounted for as much as half the world's spending on Swiss watches in past years, according to Citigroup.

For Burberry, 38% of its sales go to Chinese shoppers compared with 30% for its peers, analysts at Liberum said.

"The improvement in mainland China could be because the would-be tourists are buying more at home, but it could also be that the market there has finally bottomed out," said Zuzanna Pusz, an analyst at Berenberg.

Still, Chinese consumers are spending less overall as they hold back on purchases in markets such as Hong Kong, Burberry Chief Financial Officer Carol Fairweather said on a call with reporters.

"Hong Kong remained challenging, but Chinese shopping at home returned to growth," she said. "So it’s a mixed pattern, but important though that we still saw growth from our Chinese consumers in Europe-Middle East-Africa, albeit slower than before."

Asia-Pacific sales excluding Hong Kong and Macau rose by a mid-single digit percentage in the three months through December, Burberry said. Richemont’s fiscal third-quarter sales growth improved in mainland China, while Hong Kong and Macau had “significantly" lower sales, it said.

Richemont fell 2% to 64.15 Swiss francs at 10:44 in Zurich, while Burberry gained 1.8% in London.