Editor’s Note
This article highlights an intriguing development in the luxury sector, where a major Western conglomerate’s earnings call was notably influenced by the competitive presence of a Chinese brand. It underscores the shifting dynamics and increasing global interconnectivity within the high-end market.
Richemont, the Swiss luxury giant behind brands like Cartier, Van Cleef & Arpels, Piaget, and Jaeger-LeCoultre, announced its financial results for the fiscal year ending March 31, 2025, on May 16. Unexpectedly, Chinese gold jewelry brand Lao Feng Xiang became a “conspicuous presence” during the earnings call.
A recent report by Morgan Stanley stated that the competitive threat posed by Lao Feng Xiang to Cartier is still expanding. In response, Richemont Chairman Johann Rupert stated:
Group CEO Nicolas Bos added that Lao Feng Xiang keeps Richemont on its toes creatively.
Financial data shows Richemont’s FY2025 sales grew 4% year-on-year to €21.399 billion. Excluding the Asia-Pacific market, all regional markets achieved double-digit growth. The group attributed its gains to the high single-digit growth of its jewelry brands. Full-year operating profit was €3.76 billion, down 1% year-on-year, with the operating margin dropping to 20.9%, and the number of bases reduced by 240 compared to the previous year. In the fourth quarter (January to March 2025), sales increased 8% year-on-year (7% at constant exchange rates) to €5.17 billion, exceeding market expectations.
The jewelry division, housing the four major jewelry brands—Cartier, Van Cleef & Arpels, Buccellati, and Vhernier (acquired in September last year)—achieved full-year revenue of €15.33 billion, up 8% at constant exchange rates, with operating profit increasing 4% to €4.9 billion. Excluding the Asia-Pacific region, all regional markets saw double-digit sales growth. Cartier contributed over half of Richemont’s sales revenue and over 70% of its profit. The brand’s pressure in the Chinese market is considered a primary reason for the group’s losses in the Asia-Pacific market.
In contrast, the specialist watchmaking division, home to brands like Piaget, Jaeger-LeCoultre, IWC, and Panerai, continued to weaken. Full-year revenue fell 13% year-on-year to €3.28 billion, and operating profit plummeted 69% to €175 million. Particularly in the fourth quarter, watch sales dropped 11% year-on-year, far below the expected decline of 5.7%. Similar to the jewelry division, the main reason for the disappointing performance was sluggish sales in the Asia-Pacific market. The division’s full-year sales in the Asia-Pacific region fell 27%, a market that accounted for over half of the division’s sales in the previous fiscal year. In comparison, sales in the Americas and Japan achieved high single-digit growth, while Europe and the Middle East remained largely flat.
The ‘Other’ division, including fashion and accessories brands like Chloé, Alaïa, Dunhill, and the pre-owned watch platform Watchfinder, saw modest growth of 7%, with full-year revenue of €2.8 billion. Excluding the Asia-Pacific market, all regional markets achieved sales growth, with particularly strong performance in the Americas and the Middle East & Africa, both recording double-digit growth. Fashion sales achieved double-digit growth, driven by strong performances from Chloé and the recently acquired “little black horse” brand Alaïa. The financial report stated “Alaïa again recorded strong growth” but did not disclose specific figures. The brand, known for its body-hugging dresses and frequent celebrity appearances, entered the Chinese market in 2014 and currently has 5 stores in Beijing, Xi’an, Shanghai, and Chengdu. Richemont, traditionally focused on high-end jewelry and watches, may be starting to make breakthroughs in the fashion business.
From the performance of each division, it’s not difficult to see that the Asia-Pacific market is the biggest pain point. Full-year revenue in the Asia-Pacific region fell 13%, making it the only core market to record a decline, with sales in Mainland China, Hong Kong, and Macau combined plummeting 23%. Its share of group sales dropped from 40% in the same period last year to 33%, but it remains the group’s largest regional market.
The Americas market’s sales share increased from 22% in FY2024 to 25%, becoming the second-largest market, with full-year revenue growing 15%. The European market’s sales share rose from 22% to 23%, with full-year revenue up 11%, led by strong performances in France, Italy, and Spain. The Japanese market’s sales share increased to 10%, with full-year revenue surging 30% year-on-year, becoming the brightest market spot. The Middle East and Africa market recorded 14% growth, with sales revenue contributing 9%.
From a channel perspective, retail (including sales from group-owned boutiques) remains the largest contributor to Richemont’s sales. Revenue from this channel grew 6% to €15.04 billion, achieved through sales at 1,392 directly operated boutiques, accounting for 70% of the group’s total sales, up from 69% the previous year. The online retail channel revenue grew 11%, contributing 6% of the group’s sales, primarily driven by jewelry brands and the ‘Other’ business.
From the financial report, against the backdrop of a global economic downturn and a softening luxury market, the performance gap between Richemont’s jewelry division and watchmaking division has further widened, with the jewelry business becoming the pillar supporting the group’s operations. Morgan Stanley’s latest report stated that the competitive threat posed by Chinese gold jewelry brand Lao Feng Xiang to Cartier is still expanding. The report pointed out that Lao Feng Xiang benefits from the “downgraded upgrade” trend among Chinese consumers due to its precise brand positioning. Compared to traditional gold jewelry brands, it is more high-end, yet its price point is lower than traditional luxury brands like Cartier, quickly filling the market gap between luxury and affordability. The report also noted that Lao Feng Xiang’s rapid growth has not been accompanied by large-scale expansion. As of March 2025, Lao Feng Xiang had 28 stores in China’s first-tier high-end shopping malls, a 47% increase from the 19 stores at the end of 2021, while sales during the same period surged 572%.
According to previous reports by Nandu, Lao Feng Xiang achieved operating revenue of 9.80 billion yuan last year, a year-on-year increase of 166%, with net profit of 1.48 billion yuan, a year-on-year increase of 254%. In 2024, the average sales performance per store reached 328 million yuan. According to data from L2 Inc., among all known jewelry brands (including international and domestic jewelry brands) in 2024, Lao Feng Xiang ranked first in Mainland China in terms of average revenue and efficiency per store, surpassing international jewelry brands like Van Cleef & Arpels, Bvlgari, Cartier, and Tiffany. The company’s chairman, Gao Deming, also stated that he is committed to building Lao Feng Xiang into China’s No. 1 ancient-method gold brand and the world’s No. 1 gold brand with strong market competitiveness, and that future average store efficiency will certainly exceed 1 billion yuan.
