Stores Reopening Fuels Sales Rebound From Watches to Sneakers

(Bloomberg) -- Shoppers rushing back to stores after the lifting of lockdowns boosted European brands selling everything from watches to sneakers to handbags.

Richemont, the owner of Cartier and Van Cleef & Arpels, reported a more than doubling in first-quarter revenue, while sales at Burberry Group Plc topped estimates.

The results show consumers are hungry for luxury goods as they emerge from pandemic restrictions and vaccination campaigns accelerate. Sneaker-maker Puma SE raised its full-year sales guidance, further evidence consumers are back and spending.

Richemont shares jumped as much as 2.2% in Switzerland and Puma rose 2.6% in Frankfurt. Burberry declined in early London trading.

Richemont Sales Surge as Consumers Go Post-Lockdown Shopping

Burberry said it benefited from strong demand by younger customers in key categories such as leather goods and outerwear. The company said it’s also seeing full-price sales growth accelerating.

Under Chief Executive Officer Marco Gobbetti, who last month announced plans to leave at the end of the year, Burberry has striven to make its trenchcoats and handbags more exclusive with fewer markdowns and fewer sales through third-party outlets.

Burberry is also developing its leather goods offering, a crucial category that’s shown resilience during the pandemic at rival brands Louis Vuitton and Hermes. During the last quarter, Burberry launched the Olympia bag, which was promoted by star influencer Kendall Jenner and musician FKA Twigs.

Strategy Questions

The company also said it now expects wholesale revenue -- generated by third-party distribution channels -- will increase by around 60% in the period through the end of September thanks to a strong order book. It maintained guidance for “high single digit top line growth and meaningful margin improvement” in the medium-term.

Burberry’s strategy, which had begun to yield results, has been thrown into question by Gobbetti’s decision to decamp to Italy’s Salvatore Ferragamo SpA, itself seeking a turnaround. Speculation has also arisen on whether Riccardo Tisci, Burberry’s creative director and a long-time collaborator of Gobbetti’s, will follow him.

What Bloomberg Intelligence Says:

Burberry’s 1Q trading update is filled with positives, yet we believe uncertainty over CEO Marco Gobbetti’s 2022 replacement and whether creative director Riccardo Tisci will stay at the company are set to overshadow ongoing progress.

-- Deborah Aitken, BI luxury-goods analyst

Burberry’s Positive Trading Overshadowed by Uncertainty: React

Richemont’s sales rebound mirrors a recovery in Swiss watch exports, which are returning to pre-pandemic levels after their biggest annual slump since the financial crisis, boosted by demand in China and the U.S. Swatch Group AG said this week it swung to a profit in the first half from a year earlier.

Sales diverged in regions where tourism has come back to life and where it’s still dormant due to the pandemic. In Europe, which traditionally relies on well-heeled travelers splurging in Paris, London or Switzerland, revenue declined 15% from 2019 levels. By contrast, the Middle East region’s sales jumped 55%, driven by demand in Dubai and Saudi Arabia. The U.S. and Asia also saw strong domestic demand.

“We believe that dominant brands with iconic products will increasingly continue to gain market share in luxury,” Jean-Philippe Bertschy, an analyst at Bank Vontobel AG, wrote in a note.

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