- Prachi Singh |
Richemont sales grew by 6 percent to 11, 076 million euros (12,412 million dollars); at constant exchange rates, sales decreased by 1 percent. The company’s growth in Europe, the Middle East, Americas and Japan was offset by weaker trading in the Asia Pacific region. Operating profit decreased by 23 percent but net profit for the year increased by 67 percent to 2, 227 million euros (2,495 million dollars). The company has proposed dividend of 1.70 Swiss franc (1.71 dollars) per share, an increase of 6 percent.
In the first six months of the year under review, Richemont reported double-digit growth, followed by a decline in the second half. April sales declined by 18 percent and 15 percent on a reported and constant rates basis. All regions reported a decline in sales. At constant exchange rates, only the Middle East & Africa posted growth. In the near term, we are doubtful that any meaningful improvement in the trading environment is to be expected,” said Johann Rupert, Chairman of the company.
Financial review of the fiscal
The 6 percent increase in sales at actual exchange rates, or 1 percent decrease at constant exchange rates, Richemont said, reflected growth in jewellery, leather goods and clothing. Regionally, demand grew in Europe, the Middle East, Americas and Japan. The retail channel performed better than the wholesale channel, although sales through both channels remained volatile. The volatility was highlighted by the contrasted first and second half of the year under review for all regions and channels.
Gross profit increased by 4 percent and the gross margin percentage was 180 basis points lower at 64.3 percent of sales. Operating profit was 23 percent below the prior year. Profit for the year increased by 67 percent owing to the non-recurrence of a non-cash financial charge related to the Swiss National Bank’s actions in January 2015; and a non-cash gain arising from the merger of the Net-A-Porter Group with Yoox Group in October 2015. Earnings per share on a diluted basis, including discontinued operations, increased by 67 percent to 3.935 euros (4.41 dollars).
Sales review by regions and distribution channels
Due to both the exchange rate environment and a change in sentiment from November 2015, tourism flows in Europe were significantly lower in the second half of the year. Those flows were reflected in first-half sales growth of 26 percent, whereas the second half-year sales were 5 percent lower than the comparative period. For the year as a whole, sales in the region increased by 10 percent. Markets in the Middle East and Africa continued to report strong growth throughout the year.
Sales in the Asia-Pacific region accounted for 36 percent of the Group total. Hong Kong and Macau saw significantly lower sales throughout the year, most notably affecting the watch category and the wholesale channel. However, those decreases were partly offset by growth in other important markets, including mainland China.
The Americas region was subdued throughout the year. Domestic demand for jewellery largely offset soft demand for watches. In Japan, sales to tourists increased during the year, partly reflecting exceptionally favourable exchange rate effects for incoming visitors. The high rate of sales growth reported in the first half of the year was tempered during the second half-year period.
Sales through the Maisons’ directly operated boutiques and e‑commerce accounted for 55 percent of Group sales. During the year as a whole, sales through those channels increased by 13 percent. In the first half-year period, retail sales increased by 26 percent, whereas sales in the second half-year were just 2 percent higher than the comparative period. The growth in retail sales partly reflected the addition of 22 internal boutiques to the Maisons’ network, which reached 1, 155 stores.
The Group’s wholesale business, including sales to franchise partners, reported lower sales for the year. In the first half-year period, wholesale sales increased by 4 percent, whereas sales in the second half-year were 6 percent lower than the comparative period.
Jewellery sales up but warch business suffers
The Jewellery Maisons – Cartier, Van Cleef & Arpels and Giampiero Bodino – reported a 7 percent growth. The Maisons saw good demand for their jewellery collections, but overall demand for watches collections suffered due to a challenging environment in the Asia-Pacific and Americas regions. Despite a number of flagship closures for renovation, the boutique networks reported growth, whereas wholesale sales were lower than the comparative period.
The Specialist Watchmakers’ sales increased by 3 percent overall. Operating contribution was 29 percent lower than the prior year, primarily reflecting negative sentiment and a difficult environment in Hong Kong, Macau and the Americas region as well as the impact of a strong Swiss franc on the cost of goods sold.
Others includes Montblanc, the Group’s fashion and accessories businesses and its watch component manufacturing activities. Operating losses increased from 64 million euros (71 million dollars) to 94 million euros (105 million dollars), largely attributable to the performances at Alfred Dunhill and Lancel. The overall losses were partly offset by improved profitability at Montblanc, Chloé and Peter Millar.