Updated Nov. 10 3:05 p.m.

LONDON — Luxury leaders may shudder after they hear words like “normalization” or “moderation,” especially in reference to consumers’ appetite for expensive things.

Johann Rupert, founder and chairman of Richemont, isn’t considered one of those leaders.

As a substitute, he’s taking luxury’s slowdown in his stride and hoping to make use of it as a chance to realize market share, construct even greater value into the brands, and be sure that Compagnie Financière Richemont continues as a lean and cash-generative operation.

“I’ve been involved with Cartier since 1976 and, trust me, I’ve seen a bunch of ups and downs. And I’m very positive concerning the medium-term outlook,” Rupert said Friday as Richemont became the most recent luxury goods giant to see quarterly sales slow, in China and the U.S. specifically.

“Definitely we’ll use the chance to realize market share, and we’re ready to support our maisons. And although total demand has moderated, we’re outperforming our competitors. As a bunch we’re prepared for times like these. We were already stress-tested during COVID-19,” he said.

Rupert added that luxury isn’t alone in witnessing a slowdown in demand.

“Within the belated effort to stem inflation, [central banks] moved up rates of interest quite dramatically and the total effects are still working through the economy. So it’s no surprise that the market will decelerate across all asset classes, because that’s the aim. You fight inflation by pushing down asset prices, and — I hate to say it — by increasing unemployment,” he added.

During a call following the first-half results announcement, Rupert reminded listeners that he was early to report a slowdown within the U.S. and to warn that Chinese consumers can be more cautious and never “bust their bank cards” after lockdowns lifted earlier this 12 months.

Rupert was also frank about Richemont’s lackluster performance within the half. He said that while the period had began strongly and exceeded expectations, growth eased within the second quarter resulting from the impact of inflationary pressure, slowing economic growth and geopolitical tensions on customer sentiment.

Richemont’s growth figures, he added, were tarnished by currency headwinds and powerful comparatives with the corresponding period last 12 months.

“Consequently, we now have seen a broad-based normalization of market growth expectations across the industry. The positive news is that a soft-landing scenario appears to be prevailing in major economies with still higher growth expected from China, which should profit from stimulus measures,” he said.

Jefferies said in a report following the decision that it liked the best way that Richemont is occupied with the mid-term. The firm said Richemont, rightfully, won’t depend on price rises as a method to protect profitability.

“Somewhat, it would be brand resonance that will probably be entrusted with the duty. We also accept that branded jewelry should proceed to grow share in a flattish market,” the report said, adding that every one of Richemont’s maisons proceed to display “strong brand heat.”

The bank said Richemont stays its “top pick in a volatile luxury sector. Our view is that the dislocation between the standard of the underlying brands and of the equity valuation” is bigger at Richemont than elsewhere within the sector.

Unlike within the West, those [middle class] clients — and potential clients — are usually not overstretched.”

Johann Rupert

Within the six months to Sept. 30, Richemont’s sales touched 10.2 billion euros, growing 6 percent at actual exchange rates, and 12 percent at constant ones. By comparison, sales in the primary quarter were up 14 percent at actual exchange rates and 19 percent at constant ones.

Richemont doesn’t break out its second-quarter figures.

The jewellery category, which incorporates Cartier, Van Cleef & Arpels and Buccellati, was the largest driver of growth, climbing 10 percent within the half compared with 24 percent in the primary quarter.

The specialist watchmakers saw sales decline 3 percent, compared with 10 percent growth in the primary quarter, due chiefly to currency headwinds and Richemont’s ongoing efforts to manage inventory and the flow of merchandise to wholesale partners.

In contrast, the corporate said watch sales in its directly operated stores rose within the high-single digits, mitigating contractions in the opposite sales channels.

Asia Pacific also drove overall growth in the primary six months, with sales within the region climbing 14 percent on the back of Chinese tourism in Hong Kong, Macau and Japan specifically.

Together, sales in mainland China, Hong Kong and Macau rose 23 percent.

Rupert noted, nevertheless, that the spending habits of the traveling Chinese are far different from those who’ve been opting to remain at home.

The previous, he said, have an appreciation for “advantageous goods with provenance and quality. That shouldn’t be abating. And that offers us confidence.”

Richemont has been doing its best to deliver that finery with recent events in Beijing, Hong Kong and along the Great Wall.

Last month, Cartier doubled down on China with a landmark event on the Juyongguan Great Wall to have fun its Le Voyage Recommencé exhibition at Beijing’s Prince Jun’s Mansion.

Cyrille Vigneron, president and chief executive officer of Cartier SA, was doing double duty within the region, speaking on the WWD x SKP fashion and sweetness global summit in Chengdu, and hosting the Le Voyage event alongside Cartier China CEO Cécile Naour.

Rupert noted that, in contrast, many middle class Chinese people remain “scarred” by the experience of lockdown. He said these only children and young couples are selecting to remain at home, save their money and spend properly in a bid to preserve the wealth of their families, and prolonged families.

“We have a look at data, we speak to people who find themselves on the bottom. Unlike within the West, those [middle class] clients — and potential clients — are usually not overstretched,” Rupert said.

Other regions didn’t perform as strongly as China.

The Americas contracted by 4 percent due chiefly to lower wholesale sales and a comparatively weak U.S. dollar, while Europe saw sales increase 3 percent year-on-year despite difficult comparatives with the previous 12 months.

…we do it in order that our clients get to know us higher. But we also must get to know them.”

Johann Rupert

Rupert touched on a big selection of themes in Friday’s call, although he declined to comment on whether the sale of Yoox Net-a-porter Group to Farfetch and Alabbar would close by the tip of the present calendar 12 months, as planned.

Last month Europe’s competition watchdog unconditionally cleared the acquisition by Farfetch of a 47.5 percent stake in Yoox Net-a-porter. A 3.2 percent stake will go to Alabbar, YNAP’s longtime partner within the Middle East.

On completion of the deal, Richemont will hold a 49.3 percent stake in YNAP. Over the subsequent five years, Farfetch is predicted to amass everything of YNAP, subject to a series of conditions.

In exchange, Richemont will receive Farfetch Class A odd shares, expected to represent 12 to 13 percent of Farfetch’s issued share capital.

Rupert said Richemont was already benefitting from Farfetch’s technical solutions and searching forward to working with the corporate on data evaluation and analyzing consumption patterns and consumer desires.

“If we spend 2 billion [euros] a 12 months on communication, we do it in order that our clients get to know us higher. But we also must get to know them. Ultimately, in today’s world, should you really need to serve your clients, that you must know what they really need, what their emotions are, and the best way to service” their current and future needs, Rupert said.

In response to many questions on the decision, he said that Richemont’s exposure to the ups and downs at Farfetch was minimal, similar to “lower than a 12 months’s price” of communication expenditure, and declined to comment further on Farfetch, because it’s a publicly quoted company.

In the primary half, YNAP saw sales decline by 13 percent at actual exchange rates, and by 10 percent at constant ones. Richemont now classifies YNAP as a discontinued operation.

Asked about plans to launch a latest fragrance platform, Rupert said it was a chance that Richemont had long desired to pursue. As reported, the corporate has named Boet Brinkgreve chief executive officer of the brand new Laboratoire de Haute Parfumerie et Beauté, a platform aimed toward scaling the fragrance brands within the Richemont portfolio.

Brinkgreve hails from Dsm-Firmenich, maker of flavors, fragrances and dietary ingredients, where he held quite a lot of senior executive positions. His latest role was president of Ingredients & Group Procurement, and a member of the chief committee.

Richemont said earlier this 12 months that Brinkgreve will help Richemont’s six maisons already involved in fragrance “to succeed in critical mass on this highly competitive field, where scale is crucial.” The plan is to leverage resources across the maisons to assist develop fragrances, and “promising licenses.”

Rupert said “until now, we’ve never really had the in-house expertise to grow in fragrance and sweetness, and we had the rare opportunity to rent a Firmenich expert. Regardless that various maisons, as an illustration Montblanc, are doing very, thoroughly in fragrance, we felt the entire area needed a strategic direction.

“We’re fortunate to have gained a correct expert in that field who will help us to coordinate and create strategy. It’s not a tactical [move], but a strategic one,” Rupert said.

Within the six months under review, operating profit decreased by 2 percent to 2.7 billion euros, while operating margin shrunk to 26 percent from 28.1 percent.

Richemont said profitability was “significantly impacted by negative foreign exchange developments throughout the period.”

At constant exchange rates, operating profit grew by 15 percent.

Benefit from continuing operations rose 3 percent to 2.2 billion euros.

Richemont noted that the 55 million euros increase in profit for the period reflected a 150 million euros reduction in net finance costs, including foreign exchange losses linked to the group’s investment in Farfetch, a part of the broader YNAP sale.

At the tip of the six months, the corporate had 5.8 billion euros in net money compared with 4.8 billion euros within the corresponding period last 12 months. The rise was generated by “operating activities,” Richemont said.

Richemont shares closed down 5.2 percent at 106.7 Swiss francs on Friday.