By Scott Kanowsky
Investing.com -- Compagnie Financiere Richemont (JO: CFRJ ) SA (SIX: CFR ) shares touched a 12-month high on Wednesday after analysts covering the Swiss luxury house predicted that demand in China will recover over the coming months from a slump that helped drag group-wide third-quarter sales below expectations.
In a note to clients, analysts at Zurcher Kantonalbank said they anticipate that China's sudden decision to ease strict COVID-19 restrictions will bring customers in the key market back to the Cartier-owner's stores.
“Thanks to the opening in China after COVID, there is a relatively high probability that the sales trend will accelerate again in the March quarter, so we probably do not need to adjust our estimates much,” the Zurcher Kantonalbank analysts said.
This would mark a sharp rebound for Richemont's business in mainland China, where sales slipped by nearly a quarter in the three months to December 31 after a spike in COVID cases led to staff shortages and temporary location closures.
Although customer spending was "solid" in the U.S. and foreign tourists took advantage of favorable exchange rates to snap up items in Europe, the weakness in China was enough to temper total group sales growth to 5% at constant exchange rates. Estimates had seen the figure coming in at 8%, according to consensus forecasts compiled by Bloomberg.
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