Richemont 5 month sales robust, turns out Europe is not finished

Richemont are out with sales for five months to end 31 August, and I must admit, they look pretty impressive to me. They are better than I would have expected against the noise that we are seeing out there, again this seeming disconnect between what companies are reporting and what the economic "situation" is on the ground. I am going to take a screen grab from their release:

Note, something that we do talk about, the sales in Europe boosted by visiting tourists, which is noted by the company: "sales growth in Europe was robust, reflecting purchases made by local clients as well as travellers." Huh!? Just turn the business channels on and you will hear how completely awful things are in Europe, you would swear that they were almost starving. And not able to afford luxury goods, but there you go, sales in Europe increased on a constant currency basis by 22 percent. 22 percent? Yes, things are so bad.

But it is not all roses. The ever cautious (although optimistic) Johann Rupert had this to say about the Swiss Franc's drag on their business:

"the impact of the Swiss franc's appreciation against the euro and other major currencies obviously poses a challenge for all Swiss exporters. For Richemont, with a significant production base, our headquarters and many of our Maisons located in Switzerland, the stronger Swiss franc will continue to be negative for our cost of sales and operating expenses, maintaining negative pressure on our margins."

As my favourite crazy currency guy, David Bloom from Joburg, who works for HSBC in London said the easy part for the Swiss National Bank (SNB) was setting the level, the hard part was defending it. Because ultimately they would be owning a whole lot of Euro assets. So perhaps the safe haven tag would be shed once the SNB is holding what nobody else wants. Yes? No?

In wrapping up the Richemont results, the number that will be hung out on the washing line will be the 29 percent increase in sales. That is an awesome number in any business. And the fact that sales are flying in their fastest growing market, Asia Pacific, that grew by 46 percent in actual exchange rates and 59 percent in constant exchange rates!! Wow. The rest of the year looks challenging, but they have always been cautious. I quite liked a comment from Bloomberg's Mark Barton, who said that the average rich Chinese person (not too sure at what level that is) had 4.4 watches. Over four, less than five, you can't own half a watch. But that is the "I have arrived" stamp, check my bling. We continue to buy into recent weakness.