In the face of challenges within the luxury sector, exemplified by Burberry’s recent underwhelming performance, expectations were tempered as Compagnie Financière Richemont SA (JSE: CFR) unveiled its latest financial update for the quarter concluding on December 31, 2023. Against the odds, the company delivered a robust sales update that pleasantly surprised the market, sparking a notable 10.85% surge in its share price last Thursday. Richemont, the luxury powerhouse, disclosed an impressive 8% growth in revenue, reaching €5.59 billion.
The standout performer was the Jewellery Maisons segment, boasting a 12% surge and contributing €3.95 billion to the overall revenue. The Asia Pacific region emerged as the primary driver, generating €2.05 billion in revenue, marking a noteworthy 13% increase from the corresponding period the previous year. What’s truly remarkable is the 25% surge in sales from mainland China, Hong Kong, and Macau, a surprising feat considering the persisting growth challenges in the Chinese economy. Richemont seems to defy the prevailing industry headwinds that have burdened some of its competitors.
Technical
On the daily chart, the recent price surge triggered a breakout from the ascending channel, resulting in a shift of the price above the 25-SMA (green line), 50-SMA (blue line) and 100-SMA (orange line). However, resistance at R2,597.94 has resisted any further upside movement over the last two days and could trigger a retracement for a potential retest of the initial breakout.
Support at R2,496.01 could present a hurdle to the potential retracement, as it is backed by the 25-SMA. If the price fails to break down this level, the uptrend could be confirmed, bringing higher resistance at R2,655.99 and R2,713.65 into play in the upcoming weeks. The Fibonacci midpoint of the prior downtrend could be of importance at R2,818.22 if the breakout is sustained.
However, a breakdown at the 25-SMA could open the door to a retest of support at R2,427.83, backed by the 50-SMA, where the recent breakout was initiated. Any movement below this level could signal a false breakout, which could enforce further downward price action toward R2,341.86 and R2,269.22. A demand zone near R2,189.38 could offer neckline support if this momentum persists over the coming weeks.
Summary
Richemont recently surprised the market with a solid financial update, going against the trend in the broader luxury market. The breakout from the descending channel now needs to clear resistance at R2,597.94 if it wishes to continue its upward trajectory.
Sources: Koyfin, Tradingview, Reuters, Compagnie Financière Richemont
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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