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Richemont Profits Surge

Booming sales of jewelry, leather accessories and luxury clothing drove Richemont's nets up 22 percent.

LONDON — Booming sales of jewelry, leather accessories and luxury clothing at Compagnie Financière Richemont drove net profits up 22 percent to 645 million euros, or $815.9 million, on a 15.7 percent rise in sales to 2.3 billion euros, or $2.91 billion, in the first half ended Sept. 30.

This compares with net profits of 529 million euros, or $655.9 million, on sales of 1.99 billion euros, or $2.47 billion, in the corresponding period a year earlier. Currency conversions were made at average exchange rates for the respective periods.

The company said in a statement Friday that nearly all product categories registered double-digit sales increases worldwide, and that Dunhill and Lancel — both of which are undergoing a relaunch — had performed well.

Executive chairman Johann Rupert said in the statement that Richemont’s performance for the full 2006-07 fiscal year would be “significantly ahead” of last year, despite tough comparisons with fiscal 2005-06.

In the statement, he said strong consumer demand at retail, coupled with double-digit sales growth in markets such as Asia-Pacific, the Americas and Europe, contributed to strong half-year results. “During the first half of the year, Richemont has benefited from strong demand in its major markets,” said Rupert.

“The group has a globally diversified clientele and has demonstrated its capacity to develop quickly in new market areas — for example, China and Russia — at the same time as achieving good growth in established markets,” he added.

However, Richemont spokesman Alan Grieve said the company was not expecting the 16 percent sales growth it witnessed during last year’s Christmas season. He said the company would not be surprised by growth along the lines of 11 percent in the coming months.

Indeed, in the month of October, overall sales grew by 11 percent. “November and December are critical months for us, and barring any avian flus or terrorist attacks, we can build on the momentum in the first half. But you can never be sure; we’re not in the business of selling cigarettes or baked beans, and we constantly rely on our customers’ feel-good factor,” he said.

Richemont said jewelry sales in the first half rose by 13 percent, with double-digit growth reported by Cartier and Van Cleef & Arpels. Sales from Richemont’s specialist watchmakers rose 14 percent, while those of writing instrument companies rose 24 percent.

The flagship brand in the writing category is Montblanc, which Grieve said has moved to a new level. “It’s no longer a pen manufacturer — it’s becoming a global luxury lifestyle brand,” he said.

At Richemont’s leather and accessories houses, sales rose 10 percent. At Alfred Dunhill, sales increased 11 percent, boosted by the company’s recent purchase of its retail network in China. At Lancel, sales climbed 10 percent. Losses at Dunhill and Lancel were more than halved in the period, the company said.

“We’re starting to see Dunhill turn a corner, although it’s still early days, and we won’t be turning a profit there this year,” said Grieve. “There were stupid mistakes made in the past — with late deliveries, for example — and we’ve been trying to play catch-up. But we’ve been tightening up the ship, and we’re optimistic.”

Grieve also said brands such as Cartier and Montblanc rapidly have been developing their leather accessories businesses. “We’re getting to grips with leather goods as a proper product area,” he said.

Sales at Richemont’s “other businesses” category, which includes Chloé, rose 46 percent, and Rupert said in the statement that Chloé doubled its sales in the period, thanks to retail store openings and the broadening of its product ranges.

Geographically, all regions performed well, with sales in Asia-Pacific rising 20 percent, followed by the Americas with 19 percent, Europe with 18 percent and Japan with 14 percent.

With regard to future acquisitions, Grieve was tight-lipped. Over the past 18 months, Richemont has been whittling down its brand portfolio to focus on its core jewelry, watch and accessories businesses, and has sold off companies including men’s wear firm Hackett and Paris retailer Old England.

Last month, Richemont purchased Minerva, the Swiss specialist watch parts maker, and Richemont’s strategy going forward is to focus on its core businesses.

“We do lots of little acquisitions aimed at developing our competence and business areas. We’re really building on that,” said Grieve.

With regard to larger, branded companies Grieve said Richemont is always looking — although it may not be keen to buy just yet. “Everything out there seems very expensive right now, although we are always looking at attractive possibilities,” he said. “We get thousands of approaches every year and very few come to fruition.”