Richemont Q3 Sales Surge 24% in Watches, Jewelry

In What's New, Industry News by Jeff Prine

Cartier's 18K and diamond Masse Secrete panther décor watch which premiered this week at SIHH

Geneva—Fears about a slowdown in luxurygoods, particularly in watches and jewelry, were allayed somewhat on Monday when Cie. Financiere Richemont SA reported continued growth in its stable of 19 watch and jewelry brands.

For the quarter ended Dec. 31, Richemont posted a 24% increase in sales to 2.62 billion euros (about $3.31 billion) up from 2.12 billion euros a year earlier. That beat analysts’ average forecast expecting 2.54 billion euros in sales. Excluding currency shifts, sales grew 21%.

The results were good enough that Richemont confirmed its forecast for “significantly higher” annual operating profit for the year to March 2012 compared with the previous year’s 1.4 billion euros.

China Sales Surge

Sales were lead by Asia-Pacific, particularly China and Hong Kong, which had a 36% growth to $1.01 billion euros in sales. The Americas were up 23% to 382 million euros as Europe gained 16% to 914 million euros, the company said in a statement.

“The group’s overall performance remains solid. The growth in sales reflects growing demand in Asia-Pacific, our … creativity and the lasting appeal of our products,” Johann Rupert, Richemont chief executive, said.

By division, watches were particularly strong, increasing 697 million euros and beating analysts’ estimates. Its brands Jaeger-LeCoultre, Vacheron Constantin, A. Lange & Soehne generated about a quarter of Richemont’s sales during the period.

Sales at the jewelry brands, including Cartier, amounted to 1.36 billion euros, beating analysts’ 1.33 billion euro average estimate. The division accounts for about half of the company’s sales. Richemont also gets revenue its online site Net-a-Porter and Alfred Dunhill, the London-based maker of leathergoods, fashion and lighters.

Richemont sells luxurygoods under 19 brands including Montblanc, which has expanded into more into timepieces and accessories moving away from its traditional pen business.

The results were greeted with more optimism especially after recent reports from rivals such as Tiffany & Co. and Swatch Group suggested a slow down in 2012 sales. Tiffany lowered its full year profit forecast on  slower holiday sales and Swatch Group warned last week that it see sales slowing from 22% in 2011 to about 5% to 10% this year.

Revamp at Baume & Mercier

Some analysts expect a similar slowdown at Richemont. In a research note, analyst Thomas Chauvet at Citi predicted sales growth at Richemont slowing to 10% in fiscal 2013 on a constant currency basis.

In a Dow Jones News report today, Alain Zimmermann, ceo of Richemont’s Baume & Mercier brand, predicted that his brand will break even this year, reversing a series of declines in the last few years.

Speaking at the Salon International de la Haute Horlogerie (SIHH) held this week in Geneva, Zimmerman said the brand’s relaunch a year ago has been successful.

“We want to break even this year. Our fiscal year is not over yet, but it is looking good. There is no reason so far that we will not reach that target, especially when we’re two months from the end,” Zimmermann said.

Baume & Mercier, which reportedly has sales of about 250 million euros a year, has been struggling to regain its foothold against competitors such as TAG Heuer and Omega.

To be more competitive in its $2,000 to $3,800 retail range, Baume & Mercier reduced its doors from 3,400 to 1,600 and introduced four collection that account for about two thirds of its offerings.

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