Geneva—Cie. Financiere Richemont SA, parent to Cartier, Montblanc, Lancel and about 20 luxury brands, reported today that its full year earnings rose only 2.9%, slowed by the crackdown on luxurygoods in the Chinese market.
For the year ended March 31, Richemont posted a net profit of 2.07 billion euros (about $2.84 billion), up from 2.01 billion a year earlier. That missed analysts’ average estimate for 2.10 billion euros.
Net revenue rose 5% to 10.65 billion euros from 10.15 billion in the prior year, ahead of analysts’ forecast for 10.56 billion in sales.
The company’s retail sales grew 8% to 5.849 billion euros (about $8 billion) or a 14% increase on constant exchange rates. Wholesale revenue was up 2% to 4.8 billion euros (about $6.6 billion).
By region, sales in Europe, including the Middle East/Africa, were up 11%. In Asia-Pacific, which now accounts for about half its sales, Richemont saw a 6% increase as the Chinese government’s crackdown on bribery and luxurygood extravagance mitigated previous larger sales increases. Sales in Japan slowed due to the yen and a new value added tax.
“We produce in Switzerland and France and we have faced a significant devaluation in the yen,” said co-CEO Richard Lepeu. Richemont had increased prices in Japan to compensate for the weaker yen, he noted.
The company’s performance was driven by its watch and jewelry brand, which comprise more than 75% of its business. But at Montblanc, profit fell 64% as the brand discontinued its women’s jewelry line.
Leathergoods brand Lancel and apparel brand Chloe both struggled, doubling losses from the previous year. Nonetheless, Richemont said it was committed to the brands and confident they could improve their performances.
For April, the first month of its next fiscal year, Richemont reported a 6% increase at constant change rates.
“Sales growth at 6% in April shows continuing improvement, but at a more moderate level to what seen recently,” Exane BNP Paribas analyst Luca Solca said.
The company also confirmed that former Chairman Johann Rupert, who is on a one-year sabbatical, will stand for election as chairman at the Richemont annual meeting in September.