Richemont holds its own in difficult times
Published: Friday, May 17th 2024, 12:41
Updated At: Saturday, May 18th 2024, 01:59
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The jewelry and watch group Richemont performed well in a difficult market environment for luxury goods manufacturers. Thanks to strong brands such as Cartier and IWC, the Group remained on course for growth. Nicolas Bos was appointed as the new CEO.
The market environment has become uncertain for luxury goods manufacturers: In addition to the conflicts in Ukraine and the Middle East, economic concerns, rising interest rates and persistent inflation are dampening consumer confidence around the globe. This is also noticeable in the important Chinese market.
Consumer sentiment in China remains subdued, explained Chairman of the Board of Directors Johann Rupert in a conference call on Friday. "The feel-good factor, which is important for our industry, has suffered greatly in China as a result of the Covid crisis." It will take time before confidence among Chinese customers is fully restored.
At the same time, Rupert emphasized that the success of Richemont's Maisons is not solely linked to China. Markets such as Thailand and Indonesia also offer opportunities, while the USA has become the Group's most important market thanks to its strong growth in recent years.
Declining momentum
The Richemont Group's figures are impressive given the numerous challenges and high comparative figures: Group sales rose by 3 percent to 20.6 billion euros in the 2023/24 financial year that ended in March. Adjusted for currency effects, it would have even increased by 8 percent.
Growth momentum weakened in the final quarter, but Richemont surprised positively with an adjusted increase in sales of 2 percent. Experts had expected a weaker development after recent unconvincing figures from competitors such as LVMH or the Gucci group Kering.
The jewelry department with Cartier, Van Cleef & Arpels and Buccellati remains the basis for success. Over the year as a whole, sales in local currencies climbed by 12 percent. In contrast, business with watch brands such as Piaget and Jaeger LeCoultre only grew by 2 percent. The recent decline in Swiss watch exports had indicated this.
Margin under pressure
Profitability was impacted by currency effects in particular. Excluding the online subsidiary YNAP, which is up for sale, operating profit fell by 5 percent to 4.8 billion euros and the operating margin fell by 1.9 percentage points to 23.3 percent.
Including YNAP, the bottom line was a profit of 2.4 billion euros after 301 million in the previous year. At that time, high write-downs had had a negative impact. Richemont intends to pay a dividend of 2.75 francs per Class A public share from the profit, having previously amounted to 3.50 francs thanks to a special dividend of one franc.
New boss
The future of YNAP after the failed sale to the British online retailer Farfetch is still open. There are prospective buyers and a decision will be made by the end of the year, said Rupert.
Meanwhile, Nicolas Bos will be the new head of the Group. He has led the Van Cleef & Arpels jewelry brand to success and replaces Jérôme Lambert as Group CEO. Lambert in turn returns to the position of Chief Operating Officer.
Richemont's stable performance and the CEO election were well received on the stock market. The share price climbed by over 5 percent by midday. Investors reacted with relief after fearing that growth would slow down considerably.
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