Yesterday Richemont almost broke R160 a share for the first time. It reached a high of R159.77. The share price has been very frustrating since 2013, bouncing between R100 and R120, so it is great to see it finally break out of that range. One of the main reasons for the company being range bound was that political gift giving was discouraged by officials in China, so gold watch sales took a knock. Once that had normalised, then the globe started to shift towards digital watches and away from traditional watches.
The recent strength in the Richemont share price was thanks to strong numbers out last week, with the company reporting a 61% increase in Rand earnings. The strong growth can be attributed to mainland China sales, with the final three months of the year seeing over 100% increase in sales. Management attributes the very strong Chinese sales numbers to their economy being one of the first to re-open. For reference, on 22 May, China only reported 19 new Covid cases, 18 of which were tourists.
Another positive in the results was that online sales now represent 21% of group revenues, demonstrating that the company has now found a winning formula for selling expensive things to picky customers online. The online segment generated insignificant revenues not so long ago and cost lots of money while management tried to build a viable and scaled business.