Weak 2009 comparables make for uplift at Richemont

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Sales up across the board as luxury group reports signs of recovery.

Richemont has presented a buoyant update for the six months to September 30 with sales increases of 37 percent and operating profit up 95 percent.

The luxury group said the strong results were the result of weak comparables from the year before when group sales had fallen 15 percent.

Richemont executive chairman and chief executive Johann Rupert said: “The good performance achieved by Richemont in the first half of this year has been driven by a marked improvement in all business areas and across all geographies compared to the depressed levels seen last year.

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“Richemont’s financial position continues to be extremely strong: notwithstanding the acquisition of Net-a-Porter, the dividend payment and share buy-back transactions, the group’s net cash position was unchanged at some €1.9 billion (£1.62bn).”

Sales in Richemont’s jewellery sector jumped 32 percent in the period, with the strongest growth experienced in the group’s own stores. Richemont said that sales of both high-end and accessible jewellery lines sold well.

Cartier was the jewellery portfolio star with double-digit sales growth, albeit against weak comparatives. The brand registered strong sales of its Calibre de Cartier watches in both precious metals and steel.
Van Cleef & Arpels also recorded double-digit sales growth during the period.

Sales in Richemont’s watch division enjoyed a strong six months with sales up 38 percent, albeit against weak comparables in 2009 when many retailers curtailed orders. Despite the negative impact of the stronger Swiss franc on the cost of sales, the operating margin increased to 29 percent of sales. Results in the comparative period included a one-off charge relating to the Roger Dubuis business amounting to €13 million (£11.1m).

Richemont also noted a recovery in its wholesale business, which had struggled last year as retailers destocked. The division showed a growth of 29 percent despite the reduction in the number of points of sale in some key markets, most notably in the US.

Retail sales at the group, which include directly operated stores and newly acquired business Net-a-Porter, increased by 47 percent, well above growth in wholesale sales. As a result, retail now represents 47 percent of the group’s sales, a historical high.

Excluding Net-a-Porter, retail sales jumped 24 percent at constant exchange rates, reflecting growth in all regions. Richemont now has 855 boutiques, bolstered by store openings in the period, mostly in growth markets.

Europe continues to be Richemont’s core market, accounting for 38 percent of overall sales and showing an uplift of 27 percent. The Asia-Pacific region followed closely behind, showing a sales uplift of 50 percent and accounting for 36 percent of overall sales.

The Americas region reported strong growth despite planned wholesale account closures, albeit compared to very weak comparative figures. The strengthening of the dollar relative to the euro further contributed to the reported sales growth and the Americas now represent 15 percent of group sales.

In Japan sales increased by 23 percent in euro terms, largely due to the significant appreciation of the yen. Yen-denominated sales increased by 4 percent. Richemont said that the weak performance in the Japanese market reflects the challenging conditions for luxury businesses there in general, although it added that the return to growth was welcome.

Rupert said: “The robust sales momentum that the group has seen for several months has continued through to the end of October; sales for the month were 36 percent above those of October 2009 at actual exchange rates.

“For the second half of the financial year, we expect the high rate of growth in sales seen in the year to date to slow as a consequence of exchange rate movements and the more challenging prior year comparatives.”

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