In a report to its annual shareholders meeting on Wednesday, Richemont, which purchases Net-a-Porter.com earlier this year, said excluding acquisition of the luxury website and constant currencies, sales were up 22% exceeding a forecast of a 16% increase.
While the company didn’t provide absolute figures, Richemont now expects to post a significantly higher profit for the first half largely due to a rebound in its high-end watch and jewelry sales especially in Asia.
Despite this report, which mirrors strong first half showings at LVMH and Gucci Group, that the luxury sector is on the upswing, Richemont is conservative on the second half.
“The improved trading environment is certainly welcomed. However, it is far too soon to draw any conclusions about the sustainability of the economic recovery or whether the recession is truly behind us,” said Johann Rupert, the group’s executive chairman and chief executive.
Sales improved markedly both regionally and by product category. As has been the case in most luxurygoods sales reports, Asia lead the increases, growing 51%in the period, or 36 per cent adjusted for currencies and the acquisition. Europe and the Americas were very resilient, while Japan was up 4% on an adjusted basis.
By product category, Richemont’s high end watch brands, led by Vacheron Constantin and Jaeger-LeCoultre, proved strongest, with unadjusted sales up 40%. Jewelry, including the Van Cleef & Arpels brand, rose 32%. Richemont provides no absolute figures, nor profits, for the period.
Rupert noted comparisons would become tougher as last year’s figures would start to reflect the gradual improvement in sentiment seen in late 2009.
Richemont is “lucky” that it expanded in Asia to offset a slowdown in the United States and Europe, Rupert said.
“We’re managing the company as if there is going to be no disaster, but ultimately, I’m concerned about the debt levels in the United States and parts of Europe,” he said.
Bully on China
Richemont said it had a net cash position of €1.90 billion at the end of August despite the recent €272 million acquisition of Net-A-Porter.com, which also helped to boost the top line. Evolution Securities said the strong five-month performance indicated the Swiss company had gained market share.
“Richemont, being the cautious company that it is, does point out that the strong growth was achieved on the back of low comps and that the second half will be a tougher period,” wrote Dennis Weber, an analyst at Evolution Securities who recommends buying the stock. Sales figures were “very impressive,” he said.
Rupert said Chinese economic growth would continue.
“They’re smart, they study, they save, they work hard,” he said. “Obviously if there’s a slowdown in China, it’ll affect everybody. But a slowdown from what? From 12% to 10%? Or 12% to 7%? You know, I could live with 7% or 6%.”