Compagnie Financière Richemont SA reported an 18 percent uptick in full-year net profits on the back of strong sales of luxury watches and jewelry, as well as healthy growth in Europe and Asia.
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The world’s second biggest luxury goods group said profits for the year ended March 31 reached 1.57 billion euros, or $2.2 billion, up from 1.3 billion euros, or $1.87 billion, the previous year. Dollar figures have been converted at average exchange.
The company attributed growth to sustained demand for brands within its specialist watchmaking division, which includes IWC, Jaeger-Le Coultre and Panerai. Sales at the division spiked 15 percent to 1.37 billion euros, or $1.93 billion. Meanwhile, sales at Richemont’s jewelry houses, which include Cartier and Van Cleef & Arpels, rose 9 percent to 2.65 billion euros, or $3.73 billion.
The company also highlighted the performance of the Asia-Pacific region, despite a negative impact from currency fluctuations. The region, which represents 25 percent of group sales, registered a rise of 21 percent in revenues. The company said growth was particularly strong in Mainland China and Hong Kong.
Overall, full-year sales at Richemont grew 10 percent to 5.3 billion euros, or $7.4 billion, from 4.8 billion euros, or $6.8 billion.
“Richemont’s performance during the past year has demonstrated its capacity to weather the challenging economic environment,” said Johann Rupert, executive chairman of Richemont, Thursday. “We see the global market for true luxury goods as continuing to expand, as customers seek more sophisticated, authentic and elegant products.”
Compared with the performance of the group’s jewelry and watch houses, sales at Chloé inched up only marginally. While Richemont didn’t break out figures for the fashion brand, it said sales were broadly in line with the previous 12 months. Slower growth at Chloé is in stark contrast to the previous financial year when turnover shot up 50 percent thanks to an expanded retail network.
“It’s not unusual at a fashion house for an individual collection to be not as well received by the customer [as] the year before,” said Norbert Platt, group chief executive of Richemont, during a conference call to discuss the results. “Part of the reason was that we felt the previous designer [Paulo Melim Andersson] was not focusing on the true DNA of Chloé, we’ve not seen growth [in the line]. We’re making changes in design for the next collection to come.”
In March, Richemont dropped Melim Andersson as Chloé’s designer, replacing him with longtime Chloé staffer Hannah MacGibbon.
Platt added the vagaries of handbag fashions had also impacted sales at the brand.
Richemont’s leather and accessories brands, which include Alfred Dunhill and Lancel, saw sales increase 1 percent during the period to 309 million euros, or $435 million. The company said Dunhill is now close to breaking even after registering losses of 8 million euros, or $11.3 million, last year and after almost a decade of seeking to turn its operations around. Lancel had a loss of 4 million euros, or $5.6 million, which the company said reflects its steps to reposition the brand at higher price points.
Responding to a question posed during the call regarding Richemont potentially acquiring Tiffany, Platt responded: “We are not looking for any acquisitions.”
Looking ahead, Rupert sounded a cautious note for the current financial year, though sales in the first quarter rose 11 percent and grew 16 percent in April.
“The crisis currently affecting the global economy is a cause for concern,” he stated. “We are carefully monitoring the performance of our businesses in all markets to establish whether consumer purchasing trends are changing.”
Rupert was bullish, however, about emerging markets.
He said sales at many of the company’s brands have grown at a rate of 50 percent during the past year in China.
Richemont saw a more modest 3 percent rise in sales in the U.S., which the company said was partly due to the decrease in the value of the dollar. The company has seen “some early signs” of the credit crunch impacting sales in the U.S., according to Rupert. Japan also had a tougher year than its Asian neighbors, posting a sales decrease of 4 percent.