Richemont, a Swiss luxury goods holding company led by South African billionaire Johann Rupert, saw its share price fall to its lowest level in more than two years on Friday after the Cartier owner stated that Chinese demand will take longer to recover than expected, casting doubt on the luxury industry’s recent growth.
“We face volatile times ahead. Even if the worst of COVID-19 is hopefully behind us, we face a global environment which is the most unsettled we have experienced for a number of years,” Rupert said.
According to the company’s recently released annual results, Richemont’s profit increased by 61 percent from €1.289 billion ($1.36 billion) in 2021 to €2.08 billion ($2.2 billion). This is more than double the amount made by the top luxury goods holdings in 2020.
His statement sheds light on the factors threatening Richemont’s revenue and earnings in the medium term and raises concerns about luxury demand, which has been buoyed by wealthy consumers who are less vulnerable to the effects of lockdowns and the cost-of-living crisis.
The leading billionaire businessman also stated that the Swiss watch and jewelry maker took a financial hit in Russia after failing to reach an agreement for its online sales unit and forecasted a difficult future, particularly in the core market of China.
Richemont’s profit in its 2022 fiscal year was reduced by €168 million ($177.4 million) due to the suspension of its business in Russia. Executives confirmed that some of its products were seized in Russia and stated that the financial penalties imposed cover the company’s risks in the country.
Regardless, the company ended the year with €5.3 billion ($5.6 billion) in cash, which it describes as a “source of strength” as market conditions deteriorate.
Due to negative sentiment among stock exchange investors, Richemont’s shares fell as much as 14 percent on Friday, extending its year-to-date loss to 37 percent.
Rupert’s net worth fell by $896 million, or 9.5 percent, as a result of the 14-percent drop in Richemont shares on Friday, bringing his total net worth loss this year to $3.42 billion in 2022.