By Andrea Figueras


Shares in European luxury companies rose after Swiss luxury group Richemont reported third-quarter sales that surpassed analysts' projections, providing some relief at a time when the sector contends with sliding demand.

The owner of Cartier on Thursday reported sales of 6.15 billion euros ($6.33 billion) for its fiscal third quarter ended Dec. 31, 10% higher than in the prior-year period and ahead of consensus estimates of 5.63 billion euros, according to Visible Alpha.

The company posted better-than-expected sales for both its watches division and the core jewelry business, which houses Cartier and Van Cleef & Arpels.

These two brands are market-share winners in the attractive jewelry category, benefiting from strong brand desirability and materially outperforming in the U.S. and Europe, Stifel analyst Rogerio Fujimori said in a note. This allows them to mitigate weakness in China relatively better than most of its peers, he added.

The stock jumped more than 17% to 163.60 Swiss francs in European morning trading, its biggest one-day percentage gain ever. Luxury bellwether LVMH rose 8.4%, while French peers Kering and Hermes were up 8.3% and 5.3%, respectively. Italian high-end brands Brunello Cucinelli, Salvatore Ferragamo and Moncler jumped 2%, 5.7% and 7.4%, respectively, while U.K. trench coat maker Burberry was trading 8% higher.

One of the key questions will be on to what extent Richemont's strength is company-specific or an indication of a broader industry improvement, JPMorgan analysts said in a note to clients. "We think possibly it might be a combination of both," they added, noting that Richemont's update will support the sector, as investors will see a confirmation of accelerated demand in the all-important festive season.

The company reported double-digit growth in all markets except in the Asia-Pacific region due to a still challenging environment in China. The country, which was once a growth engine for the sector, is now contending with domestic economic woes, which have prompted Chinese consumers to save rather than spend money on luxuries.

"There is enough growth in the rest of the world to offset China weakness," Deutsche Bank analysts said in a note.

Richemont's update comes days after Italy's Brunello Cucinelli posted better-than-expected revenue figures for the fourth quarter, thanks to its wealthy customers.

In the current environment for the luxury sector, some brands have performed better than others, due to their exposure to the most affluent shoppers, who have proven to be more resilient in times of economic woes.

By contrast, brands targeting younger, less affluent shoppers have suffered more as these consumers have closed their wallets, pressured by the economic environment.

Richemont's results will add to the debate that the more premium luxury brands are likely to outperform, Deutsche Bank said, noting that the luxury slowdown is more cyclical than structural, at least at the high-end segment.


Write to Andrea Figueras at andrea.figueras@wsj.com


(END) Dow Jones Newswires

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