Is this the ‘time’ for timepieces to shine?
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Is this the ‘time’ for timepieces to shine?

Towards the end of last week, huge luxury conglomerate Richemont suddenly looked very attractive. Best known for its brands like Cartier and Piaget, Richemont is one of the main players in the Swiss watch industry – an industry that’s been hard over the past few years by factors ranging from crackdowns on gift-giving in China to (potential) competition from smart watches. It appears that sentiment in the market has finally swung to thinking that the Swiss watch industry has bottomed out – as a result, Richemont rose by a massive 9.4% to a one-year high!

Richemont owned the second week of January

SOURCE: Yahoo Finance

Richemont returned to growth as China’s withering demand began to improve, and sales to retailers slowed their decline. The result was an unexpected 5% gain in revenue (the consensus estimates predicted a decline), when adjusted for currency effects, in the three months to December. According to analysts cited by Bloomberg, this is a sign that the luxury watch downturn – the worst the industry’s seen for over four decades – might at last be over.

One of those analysts, Patrick Schwendimann, from Zuercher Kantonalbank, went on the record, saying: “The worst is probably over for Richemont and Swatch, and for the Swiss watch industry with a lag. The likelihood that the Swiss watch industry will see growth in exports in the course of 2017 has increased. It’s reassuring that sales gained traction in the most important quarter of the year.”

Bump Up
Richemont sales recover from last year’s Christmas decline

SOURCE: Bloomberg

Berenberg analyst Zuzanna Pusz also saw strong underlying reasons for positivity: “The retail performance is in particular positive as this is the signal that underlying consumption is recovering and as such wholesale re-ordering could follow.” 

Dominion holds Richemont in its Global Trends Luxury Fund.

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The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.