Geneva–Compagnie Financiere Richemont AG reported today Wednesday a 23% increase in sales for the five months ended August, helped by continued positive momentum across its regions. Sales were also benefited by weakening of the euro against dollar. At constant exchange rates, the sales growth was 13%.
The Swiss luxury goods group also confirmed its first half operating profit growth view of about 20 to 40% from the prior year. The increase in net profit for the period also is expected to be in that range.
Richemont said sales growth in Asia had markedly slowed and that Europe was now its fastest-growing region, helped by tourist spending including buying by Chinese visitors.
“Thank God for Europe,” Johann Rupert, Richmont’s chief executive told reporters in Geneva at the shareholders’ meeting.”Thank God for Switzerland. Thank God the Chinese love Swiss watches. Plus, with the currency shift it’s becoming expensive for them to buy in China, with the weakening of the euro, so they’re buying more in Europe.”
The company said its sales growth in Europe was strong, particularly in retail channel in major tourist destinations. Meanwhile, in the Americas, sales growth slowed to 6% on a constant currency basis, partly due to timing of exceptional sales in the prior-year period.
Expanding in China “Where the Money Is”
At actual exchange rates, sales grew 23% in Europe, and the growth was 27% in Asia-Pacific. In the Americas and Japan, sales improved 19%.
In the first half last year, the company’s net profit was 709 million euros or 1.266 euros per share and operating profit was 1.075 billion euros. Sales for the six months were 4.214 billion euros.
The company reported that during the recent five-month period, it experienced double-digit sales growth in all of its business areas, except Montblanc, which had no significant benefit from tourist destinations. Sales of jewelry, which includes Cartier, rose 12%, while watches were up 16%.
Thanks to rapid growth in the Asia-Pacific region that’s helped offset the effects of reduced spending elsewhere. But now with a slowdown in China too, Richemont has had to revise its strategy and look for new markets in inland cities, too.
“They are busy constructing 200 malls as we speak. Big malls,” Rupert said. “And we want to be there in the right malls with the right partners.”
Rupert said he did not want to add fixed costs but Richemont was expanding in China because “that’s where the money is.” Other places that could attract Richemont is looking at for expansion include Brazil and wealthy African oil-rich countries like Angola or Nigeria, he said.
“Richemont remains excellently positioned to benefit from the current boom in demand … However, growth rates are slowing down versus a very high comparable basis,” Helvea analyst Michael Heider said. “It will be more and more difficult for the company to surprise on the positive.”
“There’s been a slowdown, but the comparison base was very strong,” said Rene Weber, an analyst at Bank Vontobel in Zurich, who expects growth to continue to slow. “It’s in line with expectations and things are still on track.”
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