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LONDON — Johann Rupert is taking a break.
This story first appeared in the May 17, 2013 issue of WWD. Subscribe Today.
The chairman, controlling shareholder — and lodestar — of the world’s second-largest luxury goods group, Compagnie Financière Richemont SA, will take a yearlong sabbatical beginning in September. Rupert revealed his decision as the company posted a 30.2 percent increase in net profits to 2.01 billion euros, or $2.59 billion, in the 12 months to March 31.
Based on the results, and to mark the company’s 25th anniversary, Richemont also increased its dividend to one Swiss franc, or $1.03, a share. The stock market shrugged off news of Rupert’s sabbatical, sending Richemont’s shares up 7.6 percent to close at 88.80 Swiss francs, or $91.78.
During a conference call with analysts, Rupert, 62, said his leave was not a prelude to retirement: “How many people have been in the same job for 25 years? After a while, you decide you want just a little bit of free time.…You’ve got friends who say ‘Let’s take two weeks and go to the Rugby World Cup.’ There are about 50 books I want to read. People have invited me fly-fishing, bonefishing, but I’m too embarrassed to go, because I don’t know how to do it and I don’t have time to learn,” he said.
“It’s not my heart. I am perfectly healthy. Stopping smoking, which I have done for a year, it was far tougher for my family! There is nothing sinister. I just want to have a bit of free time. I’m happy, relaxed. The good news is the share price went up today — people are relieved I am getting out of here,” said Rupert, who until last month also served as the company’s chief executive officer, a role he took on in 2010 to guide Richemont through the worldwide economic crisis.
A spokesman reiterated that Rupert’s heart — he had three stents put in last year in New York — is not the issue and that he is in good health.
A financial analyst who covers the company and who spoke on condition of anonymity said Rupert’s leave of absence would not impact the group at all.
“It’s a nonevent. He needs a break, he wants to enjoy his life and he’s left the company in very good hands,” the financial analyst said. “Plus, he’s still going to be around if anyone needs to call him. The only thing we can safely assume is that there will probably be no major M&A activity at Richemont over the next 12 months — that is one of the things Rupert oversees.”
During Rupert’s absence, Yves-André Istel, deputy chairman, will chair meetings of the board, while the company will be run by co-ceo’s Bernard Fornas and Richard Lepeu, who took over on April 1. The latter two, along with chief financial officer Gary Saage, form the company’s senior executive committee.
“The three of us used to work together at Cartier….And we’re comfortable taking on this challenge,” said Saage during Thursday’s conference call to discuss the 2012-13 results. “We are thrilled that Mr. Rupert has faith in us to carry the business forward and we can’t wait for his return.”
There may be other management changes in the pipeline. Martha “Marty” Wikstrom, ceo of Richemont’s fashion and accessories businesses since 2009, could exit the company soon, according to market sources. A Richemont spokesman had no comment and Wikstrom could not be reached for comment Thursday.
Wikstrom has been a non-executive director of Richemont since 2005. During her tenure, she appointed new ceo’s at Lancel, Chloé and Dunhill, along with new designers at the latter two maisons.
On Thursday, Richemont reported that the new fiscal year is off to a positive start, with sales in April 13 percent above the comparative period, and 12 percent at constant exchange rates. The ever-cautious Rupert warned that one month of sales should not necessarily be taken as an indication of the year as a whole.
Sales in the 12 months to March 31 climbed 14.5 percent to 10.15 billion euros, or $13.09 billion, with double-digit increases across all regions with the exception of Japan, and all product divisions save for Montblanc. At constant exchange rates, overall sales climbed 9 percent.
Dollar figures have been converted at average exchange rates for the 12-month period.
Saage said that in addition to Cartier, which generates the lion’s share of sales and profits for the group, the “two stars of the show” in terms of profit growth were Van Cleef & Arpels jewelry and Jaeger-LeCoultre watches.
“The high jewelry component of the jewelry segment had exceptional sales last year,” he said. Richemont does not break out individual brand performance but reported that sales at the jewelry houses overall advanced 13 percent and profit was up 20 percent. The company called Cartier’s and Van Cleef’s results “remarkable.”
Sales at the watch division grew 18 percent and profit grew 36 percent, while sales at Richemont’s “other” division, which includes the fashion and accessories businesses, Net-a-porter and watch component manufacturing businesses, climbed 16 percent.
By region, the Americas posted the highest rate of sales growth — 18 percent at actual exchange rates. Although Richemont purchased the American luxury golfwear brand Peter Millar in September, Saage argued that it was not the source of the double-digit increase in the region.
“In America, it’s really a jewelry story — a bijoux jewelry story,” he said, adding that the driver behind growth was “everything but high-end jewelry.” He said Peter Millar was “quite small” and did not move the needle on sales in the period.
Sales in Europe grew 17 percent, due chiefly to demand from foreign tourists. Saage said that more than 50 percent of Richemont’s retail sales in Europe are from people who don’t live there. “European [growth] is down to tourist destinations; domestic locations don’t perform as well. Clearly, tourism is the main driver in Europe, and a large component of that is Chinese tourism,” he said.
The group’s operating profit was 18 percent higher than the prior year due partly to favorable currency movements and an increase in the number of sales through Richemont-owned boutiques. The 30.2 percent spike in net profits was largely due, the company said, to the nonrecurrence of charges related to the strengthening of the Swiss franc in the previous fiscal year.
Last year also had its share of challenges: Fashion and accessories saw single-digit sales growth but operating profits were lower than the prior year at 23 million euros, or $29.7 million. The company said the slower growth in fashion and accessories, and at Montblanc, was due to “challenging” conditions in the companies’ major markets.
During the conference call, Saage also admitted that some 100 store openings — for all the brands — were planned for last year, but the company ended up scaling back its plans and opened 66 stores. A further 50 stores worldwide are set to open in the current fiscal year.
“Part of that [scaling back] had to do with the external environment, part with a change in strategy,” he said. “In fashion, accessories and at Montblanc, business was a little less than hoped for and management became more conservative.”
In the case of Van Cleef specifically, he said, the plan was to open a lot of smaller shops, but that changed, and they went back to the strategy of opening bigger stores. “Also, some stores that were set to open at the end of last year will open early this year,” he added.