LONDON – Richemont ended its year on a high with sales climbing 11 percent at constant exchange to 22.4 billion euros in the period ending on March 31.
The luxury giant, owner of brands ranging from Cartier and Van Cleef & Arpels to Chloé, said that fourth-quarter sales were up 13 percent, compared with 11 percent in the previous quarter.
Sales during the year were fueled by growth in all business areas, regions and distribution channels at constant rates, as well as by sustained double-digit performance at jewelry maisons and in the Americas region throughout the year.
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Operating profit climbed 23 percent at constant exchange to 4.5 billion euros, bolstered by strong top-line growth and cost discipline, which Richemont said mitigated the effect of weaker main trading currencies and higher raw material costs.
Profit for the period rose to 3.5 billion euros from 2.8 billion euros, due in part to the non-recurrence of the Yoox Net-a-porter write-down in the prior year.
At actual exchange rates, sales for the year were up 5 percent, while operating profit rose 1 percent.
The company’s founder and chairman Johann Rupert said that in a persistently volatile geopolitical environment, the group delivered “strong growth and solid results, reflecting the resilience of its business model, the strength of its maisons, the enduring agility and creativity of its teams and the benefits of its balanced regional footprint.”
He said performance was driven by “a clear long-term approach, centered on differentiation, strong brand identity and disciplined pricing. While each maison operates within its own market sector dynamics, the success of many collections highlights the importance of nurturing strong creativity consistent with a clear and distinctive identity, supported by consistent execution over time.”
Rupert was even more bullish during a presentation to analysts. He touted Richemont’s clean, healthy accounts, and said, “I can assure you we are better shape now than I can ever remember, from balance sheet through tech, supply chain, everything traditional that we could foresee. We’re in great shape.”
Analysts were full of praise. Jefferies titled its report “Beguiled,” and said the year-end performance and acceleration of growth in the fourth quarter “confirm the strong demand backdrop for branded luxury jewelry already mapped out by a number of peers.
Citi said Richemont closed “a volatile and generally downbeat luxury reporting season with standout fourth quarter sales performance. It said that in the fourth quarter, the U.S., Asia and Japan were all up in the strong double-digits while sales at the the jewelry maisons rose 16 percent, bolstered partly by the Lunar New Year celebrations in February.
RBC Captial Markets said the results were “largely what we and the market was expecting – strong top line, supported in large part by price contribution for key jewelry brands, Cartier and Van Cleef & Arpels.”
In the 12 month-period, jewelry sales rose 14 percent at constant exchange and 8 percent at actual rates to 16.5 billion euros. Richemont said all of its brands, Buccellati, Cartier, Van Cleef & Arpels and Vhernier, experienced a “strong dynamic fueled by higher demand across all geographies, and resulting in further market share gains in both jewelry and watches.”
Richemont added that as its brands faced higher gold prices combined with unfavorable currency movements, they implemented “measured price increases, and demonstrated agility in managing their operating costs.” As a result, they were able to grow their operating profit to 5 billion euros, reaching an operating margin of 30.5 percent.
The specialist watchmakers reported sales of 3.1 billion euros, down by 4 percent at actual exchange rates, but up 1 percent constant rates, “showing some encouraging signs after a challenging 24-month period for the watch market, underpinned by growth outside of China.”
Richemont said the second half saw some improvement with A. Lange & Söhne, Jaeger-LeCoultre and Vacheron Constantin driving growth. The division had an operating result of 107 million euros, with gross margin impacted in part by “external macroeconomic headwinds.”
During the call following the results announcement, Rupert also denied media reports that Richemont was planning to sell Jaeger-LeCoultre. He called the rumors “nonsense,” and said the “two or three bloggers” who have been writing about it, “don’t have a clue.” He talked about his passion for the brand and described it as “the watchmaker’s watchmaker.”
Sales at Richemont’s “other” business area fell 2 percent to 2.7 billion, but rose 3 percent at constant exchange rates, with “modest growth” at the fashion and accessories maisons, and an improvement in the second half.
Peter Millar and Alaïa “maintained their solid momentum, building on several years of growth,” while Montblanc saw “encouraging sequential improvement as the maison progressed on its transformation. The posted an operating loss of 96 million euros, a modest improvement on the previous year.
Sales in the Americas region were up 17 percent, followed by the Middle East and Africa at 13 percent. Richemont said war in the Middle East only began impacting sales in March, and that locals in the region were still making purchases. Europe and Japan were both up 9 percent, while the Asia Pacific region rose 8 percent due to a Asia Pacific driven by a “slight growth” in China, Hong Kong and Macau combined.
Rupert said that the macroeconomic uncertainty is likely to persist, “not least in relation to developments in the Middle East. Against this backdrop, the group remains vigilant and will continue to rely on its long-term orientation and disciplined operating approach to enchant clients, maintain the desirability of its Maisons and deliver sustainable value over time for all stakeholders.”
Despite the strong performance and Rupert’s bullish outlook, shares in Richemont were down nearly 2 percent to 154 Swiss francs at 12:00 p.m. BST.
