Destocking damages Richemont full-year results

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Affordable jewellery performs well but luxe jewels & watches soft.

Sales at Richemont fell 4 percent to €5.2 billion (£4.4 billion) in the year to March 31 as destocking by retailers took its toll on the luxury goods business.

Richemont noted improved middle-market jewellery sales, but said high-end watch and jewellery sales remained soft with brands Roger Dubuis and Baume & Mercier making a loss.

Wholesale revenues dropped 10 percent to €2.8 billion (£2.4 billion) while its retail sales rose 4 percent to €2.4 billion (£2 billion) as the group closed wholesale accounts and focused on its own retail stores. Operating margin was 16 percent of sales, and the group reported improved cash flow and an improved net cash position.

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Jewellery sales in the period fell 3 percent in what Richemont said was a “noteable achievement given the trading environment”. The luxury group said that high-end jewellery sales failed to recover in the period but that sales of more accessible bijoux ranges performed well.

Operating contribution at its jewellery division dropped 5 percent but the contribution margin was maintained at 28 percent.

Cartier registered a marginal decline in sales and profitability as it "made the most of its broad geographic coverage and leading position in growth markets”. Richemont said Van Cleef & Arpels was also resilient, albeit to a lesser extent, due to a proportionately higher exposure to Europe and the US.

Wholesale watch sales at the group suffered in the year as retailers destocked to reduce inventories in the latter part of 2009. Overall sales at the watch division fell 17 percent in the first half of the financial year but showed signs of recovery in the second half, finishing with a full-year drop of 6 percent.

Richemont said Piaget and Vacheron Constantin performed "particularly well” and were able to grow sales in this difficult period. The group said that all of its brands, with the exception of Roger Dubuis and Baume & Mercier, remained profitable in the period.

The watch division’s contribution margin fell 4 percentage points to 17 percent of sales. This decrease was primarily due to reductions in gross margin, reflecting a stronger Swiss franc in particular, as well as the slowdown in sales and production.

The favourable year-on-year impact on profit arising from two SIHH events in the prior year was partially offset by a one-off charge relating to the Roger Dubuis business and the costs associated with the reduction of the number of points of sale in the Americas and Europe.

Richemont chief executive and executive chairman Johann Rupert said: “Richemont has weathered the economic crisis to date and is in a strong financial position. Our businesses reacted quickly and positively to the downturn in demand and have grown market share.

“We are ready to capitalise on growth opportunities in new markets and to meet demand in established markets once the economic situation improves. Key drivers of the group’s future success will be innovation and creativity, which have always been hallmarks of the Maisons. There will still be plenty of challenges ahead but I am confident that Richemont’s Maisons will surmount them.”

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