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Leibish & Co
Friday, November 9, 2012
Richemont Sales Up 21%, Profit Up 52%
Swiss luxury goods conglomerate, Compagnie Financière Richemont, said Friday that sales increased, year-over-year, for the
first half of the fiscal year by 21 percent to €5.1 billion ($6.5
billion). By constant exchange rates sales grew 12 percent. Profit for the period rose 52 percent to €1.08 billion ($1.37 billion); with operating profit up by 28 percent to €1.38 billion ($1.75 billion), benefiting from favorable currency movements, and gross profit up 24 percent to €3.31 billion ($4.2 billion). Operating margin gained 150 basis points to reach 27 percent. The Geneva-based company cited “solid growth in all segments, regions and channels” along with
favorable currency rates and Asian tourism in Europe for the strong performance. Richemont owns many of the world’s best-known luxury brands (known as “maisons” by the company) including Cartier, Montblanc, Vacheron Constantin, Van Cleef & Arpels and Piaget. It also has wholesale businesses and owns the luxury retail website, Net-A-Porter.com. A list of its businesses can be found by following this link. “The Group’s maisons benefited from favorable exchange rates effects, successful product launches as well as strong pricing power,” said Johann Rupert, Richemont executive chairman and CEO. “The increase in net profit was well above the prior period, reflecting both the growth in operating results and the non-recurrence of non-cash losses, which stemmed from the Swiss franc’s appreciation against the euro.” He added, “Sales growth rates moderated, as evidenced by the October sales which grew by 12 percent at actual exchange rates. At constant exchange rates, they were 7 percent higher. Richemont is seeing good growth in Europe, supported by Asian tourism which is compensating for slower domestic Asia Pacific sales. Retail continued to lead wholesale, reflecting robust jewelry sales.” Rupert did warn that sales and profits could slow as exchange rates will like be “less favorable” for the remainder of the fiscal year. By region the company reported that sales in Europe accounted for 36 percent of overall sales as the region enjoyed good growth, with tourists driving the above-average increase. The highest growth rates were in the Maisons’ own boutiques in tourist destinations, including the Middle East. Europe’s reported a 23 percent growth in sales for the period to €1.85 billion ($2.35). At constant exchange rates, sales increased by 19 percent. Asia Pacific remains the strongest region for Richemont but sales growth has slowed. The region accounted for 41 percent of the Group’s total, with Hong Kong and mainland China the two largest markets. “Sales growth in our maisons’ own boutiques in the region was well above the increase in sales to wholesale partners, partly reflecting the number of boutique openings in the last two years,” the company said. Asia reported a 22 percent growth in sales for the period to €2.1 billion ($2.67). At constant exchange rates, sales increased 9 percent. After two years of what the company termed as “outstanding sales,” the Americas region reported that sales grew 16 percent to €698 million ($877 million). However, at constant exchange rates, growth was 4 percent. The region represented 14 percent of overall sales for Richemont. Japan, which Richemont lists separately, saw what the company terms as “continued momentum” in sales in all retail segments. The struggling market saw its sales increase by 18 percent to €448 million ($570 million). At constant exchange rates the increase was 4 percent. Its group of jewelry brands saw sales grow by 20 percent to €2.6 billion ($3.3 billion) with operating results of €958 ($1.21 billion), a 31 percent increase. Operating margin gained 280 basis points to reach 36.7 percent. Meanwhile, its specialist watchmakers group reported that sales increased 25 percent to €1.46 billion ($1.85 billion) with operating results of €470 ($592 million), a 51 percent increase. Operating margin gained 560 basis points to reach 32.2 percent. Montblanc, the German brand known for its luxury writing instruments but also manufactures and sells luxury leather goods, jewelry and watches, is listed separately by Richemont. It reported that its sales increased 10 percent to €368 million ($468 million) with operating results of €53 million ($67.3 million), a 2 percent decline. Operating margin lost 180 basis points to reach 14.4 percent. Richemont said that Montblanc doesn’t benefit much from sales in tourist destinations. For its other businesses—which includes Richemont’s Fashion and Accessories businesses, Net-a-Porter and watch component manufacturing activities—results are as follows: * Fashion & Accessories maisons saw double-digit sales growth and operating profits were in line with the prior period at €25 million. * Sales growth at Net-a-Porter is “normalizing” but continues to exceed the Group’s average. Net-a-Porter reduced its losses during the period, but generated a positive operating cashflow. * Losses at the Group’s watch component manufacturing facilities were in line with the comparative period.
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I am a freelance writer and editor who covers the luxury jewelry and watch industry for several publications, including Forbes.com the Financial Times, Hong Kong-based JewelleryNetAsiaand the Italian jewelry magazine, VO+. In addition, I have my own blog covering the jewelry and watch industry, Jewelry News Network.