- Prachi Singh |
Annual sales at Rechemont decreased by 4 percent at both actual and constant rates to 10, 647 million euros (11,566 million dollars). Excluding the impact of exceptional inventory buy-backs, sales declined by 2 percent at constant rates. The company’s operating profit decreased by 14 percent. Richemont has proposed dividend of 1.80 Swiss franc (1.79 dollars) per share, an increase of 6 percent.
The past year posed challenges for Richemont. The group responded to changes in demand, which particularly affected our watch businesses, and shifting patterns of consumption. Profit for the year was well below the prior year’s level. Excluding the one-time gain on the merger of the Net-A-Porter and Yoox Group’s in the prior year, profit for the year would have decreased by 24 percent,” said Johann Rupert, group’s Chairman in a statement.
Review of the financial performance
Gross profit for the year declined by 4 percent to 6, 799 million euros (7,385 million dollars) in value terms. Operating profit decreased by 14 percent with an operating margin of 16.6 percent.
Higher depreciation charges and variable rentals as well as the reopening of the Cartier New York and Ginza flagship stores led to a 3 percent growth in selling and distribution costs. These charges also partly reflect the net closing of 38 internal stores during the course of the year under review and net opening of 22 during the prior year.
Profit for the year decreased by 46 percent to 1, 210 million euros (1,314 million dollars). Earnings per share on a diluted basis decreased by 46 percent to 2.141 euros (2.33 dollars).
Sales by region
Full year sales in Europe, compared to a 10 percent increase in the prior year, declined by 8 percent at constant exchange rates, having improved from a 17 percent decline in the first half of the year. The company said, France and Switzerland registered the largest contractions while the United Kingdom enjoyed a double digit growth rate in sales following the EU referendum. All product lines showed positive momentum with the exception of watches.
Sales in the Asia Pacific region, Richemont said, were broadly in line with last year, at both actual and constant exchange rates. Mainland China, now the group’s second largest market, Korea and Macau enjoyed strong sales. While watches in the internal stores and jewellery, leather goods and writing instruments in the region witnessed growth, clothing sales were impacted by 90 internal and franchise net store closures across the region.
The Americas returned to growth at constant exchange rates, driven by good sales in jewellery, leather goods and clothing. Sales were also supported by the reopening of the Cartier flagship in New York last September. In Japan, the reopening of the Cartier flagship store in Ginza partially mitigated mixed exchange rate effects on tourist spending and the high comparative sales growth figures of 20 percent reported in the prior year. At constant exchange rates sales decreased by 12 percent and 2 percent at actual exchange rates.
Sales in the Middle East and Africa declined by 10 percent at constant exchange rates, with negative currency movements weighing both on tourist and local spending.
For the full year the retail channel generated a 4 percent sales increase, after a decline in the first half of the year. Strong retail sales in Mainland China, Korea, the United Kingdom and the USA compensated for declines in Hong Kong and France. Retail sales were impacted by the net closing of 38 internal boutiques, leading to a total network of 1,117 internal stores.
The group’s wholesale business, including sales to franchise partners, reported lower sales for the year partially impacted by inventory buy-backs, the majority of which occurred in the first half of the year. All regions and most countries declined with the notable exception of the United Kingdom and Korea.
Jewellery segment posted 2 percent decline
The company saw good growth in jewellery sales at Cartier and Van Cleef & Arpels partly offset weakness in watch sales, thereby limiting the Jewellery Maisons’ sales decline to 2 percent.
The operating result was 11percent lower than in the prior period, pressured by lower sales and the 151 million euros (164million dollars) one-time charges associated with the exceptional inventory buy-backs and capacity adjustments. The Specialist Watchmakers’ sales decreased by 11 percent, reflecting a difficult environment for watches in the wholesale channel. The lower demand for fine watches together with the adverse impact of buy-backs and production capacity adjustments led to a 57 percent reduction in the segment’s operating result.
‘Other’ includes Montblanc, the Group’s fashion and accessories businesses and its watch component manufacturing activities. The segment was impacted by 105 net internal and franchise store closures. The 2 percent sales growth was driven by the continued positive performances at Montblanc, Chloé and Peter Millar.