LONDON — A perfect storm of healthy sales, easy comparative figures, new store openings and the purchase of Net-a-porter drove Compagnie Financière Richemont SA’s profits and sales up 79.8 percent and 33.2 percent, respectively, in the fiscal year ended March 31.
Johann Rupert, executive chairman and chief executive officer, said the jewelry- and watchmaking divisions had posted record profits and sales, despite the stronger Swiss franc.
He added that the new year had gotten off to a strong start too, with sales rising 32 percent year-on-year.
“The performance achieved in the year under review, following a major global economic crisis, confirms the appeal of each of the maisons,” Rupert said Thursday. “We will continue to invest in their organic growth through higher levels of capital spending in manufacturing capacity and in the further development of the group’s own retail network, particularly in growth markets.
“Our capital investments are therefore likely to range between 6 and 8 percent of sales in the next two years. We are more than ever encouraged by the maisons’ growth potential, and we believe it to be the best route for creating shareholder value,” he added.
Profits rose to 1.08 billion euros, or $1.52 billion, from 600 million euros, or $846 million, including a one-off accounting gain from the acquisition last year of the on-line retailer Net-a-porter.
Sales increased to 6.89 billion euros, or $9.71 billion, from 5.18 billion euros, or $7.30 billion, with all product categories and regions, excluding Japan, growing in the double digits. In the previous year, group sales had decreased by 4 percent.
All figures have been converted at average exchange rates for the 12-month period.
Net-a-porter, which Richemont purchased last year, is performing ahead of business plan, with sales of 274 million euros, or $386.3 million.
But the results — and profit margins in particular — failed to impress the financial markets. On Thursday, Richemont shares closed down 1.52 percent at 55.15 Swiss francs, or $62.62 at current exchange, after sliding to 52.95 Swiss francs, or $60.12, earlier in the day.
Analysts pointed the finger at the watch division, where restructuring at Baume & Mercier ate into profit margins. “Restructuring of the Baume & Mercier product in [the second half] has weighed on both the watch division and overall operating margins in the full year, which missed our 21.3 percent and consensus at 21 percent,” wrote Preeti Rambhiya, equity research analyst at Standard & Poor’s.
Overall operating margins at the company rose to 19.7 percent from 16 percent. Operating margins in the watch division increased to 21.4 percent of sales, compared with 17.1 percent of sales last year.
Meanwhile, Richemont’s retail rollout is gathering steam, with a total of 59 stores planned for the current fiscal year, a 7 percent increase in retail space, and the same increase as the year ended on March 31.
For the first time, retail sales from the company’s 876 boutiques exceeded 50 percent of the group’s overall sales.
Gary Saage, chief financial officer, said during the call that new stores would open in growth markets such as China, as well as in more mature markets like the U.S. Vacheron Constantin and IWC are both planning to open stand-alone stores on Madison Avenue, with an average size of 2,500 square feet.
Other growth markets include the Middle East, and especially Qatar and Dubai. Richard Lepeu, deputy ceo, said India is not as exciting a market because of local trade barriers. He said, however, that Indians were shopping in the Middle East and helping to drive sales in that region.
With regard to jewelry, Cartier and Van Cleef & Arpels were top performers during the year. Lepeu said a “very broad base of merchandise and price points” were driving sales in the jewelry division overall. He added, however, that sales of the ultrahigh-end items — those costing more than $1 million — were “less buoyant.”
Lepeu said that despite Richemont’s net cash position of 2.59 billion euros, or $3.65 billion, the company was not prowling for acquisitions. “Instead, we have quite a big project for organic growth. We think it’s better to have the cash, which allows us to keep our freedom and gives us the speed to react to whatever may happen in the future,” he said.
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