Richemont Growth Slows Slightly

Jewelers lead gains in quarter, while leather and accessories post 5 percent drop.

LONDON — Sales growth at Compagnie Financière Richemont SA might have slowed in the past five months, but chairman Johann Rupert said Wednesday he’s confident the company will be able to weather the global economic storm.

This story first appeared in the September 11, 2008 issue of WWD.  Subscribe Today.

“Whatever may lie ahead in the short term, Richemont will continue to prosper and grow over the long term,” said Rupert in a trading statement spanning the period to Aug. 31.

Richemont owns a portfolio of luxury brands including Cartier, Montblanc, IWC, Van Cleef & Arpels, Chloé and Dunhill.

“Products and brands positioned at the entry and midmarket price points in the luxury goods industry are experiencing difficult market conditions today,” said Rupert. “However, to date, the top end of the luxury market — where Richemont’s maisons are predominantly positioned — has not been affected.

“This is not to say that Richemont is immune from a slowdown, but we do believe that we are better placed than many to weather difficult times ahead,” he added.

Future growth is likely to come from outside the U.S. Rupert said sales in America were flat during the five-month period, largely due to exchange rate effects. In local currency terms, however, underlying sales grew by 14 percent.

“The American market is beginning to show some signs of a slowdown, which is to be expected, given the difficulties that the economy is facing,” he said. Japan did not fare any better: Sales fell by eight percent in the period.

Wednesday’s statement said sales growth in the five months to Aug. 31 dipped to 11 percent, compared with 13 percent in the first three months of the year.

The strongest performers were jewelry brands Cartier and Van Cleef & Arpels, where combined sales grew 13 percent. High-end jewelry pieces did particularly well, the statement said.

On the downside, sales at the leather and accessories businesses, which include Dunhill and Lancel, were down five percent in the period, Richemont said, due to a difficult trading environment.

While the jewelry houses were the best performers in the period, Richemont’s watch brands didn’t fall far behind. Growth in that sector, which includes IWC, Piaget and Vacheron Constantin, was 12 percent.

Sales at Montblanc grew by 2 percent, with high-single-digit growth through the company’s own boutique network offset by lower wholesale sales.

In Richemont’s other business category, which includes the clothing brand Chloé, growth was 24 percent. However, the company said the increase was largely due to the impact of acquisitions during the past year, such as that of watch case manufacturer Donzé-Baume.

By region, sales in Asia-Pacific increased 19 percent, and in Europe they grew 17 percent. The statement said European sales were particularly strong in France, the U.K. and Switzerland due to spending by tourists from emerging markets.

In a research statement Wednesday, Citigroup Global Markets said there were “legitimate concerns” over Richemont’s resilience in a challenging environment.

However, Citigroup added: “We believe high-end product positioning-pricing power, high emerging markets exposure, a strong balance sheet together with the upcoming demerger make the company’s valuation and medium-term earnings look attractive.”

Rupert stressed there was no net debt on Richemont’s balance sheet and that the recently announced demerger would not weigh on Richemont’s finances. As reported last month, Richemont said it would proceed with plans to create two separate businesses — a luxury goods business and an investment vehicle listed on the Luxembourg Stock Exchange.

Compagnie Financière Richemont will be focused solely on luxury goods and will continue to be listed on the Swiss Stock Exchange, while Richemont SA will be renamed Reinet Investments SCA, and will be listed in Luxembourg. The demerger is expected to take place later this year.

On Wednesday, Richemont only issued sales growth percentages, and will release interim results for the six months to Sept. 30 in November.�