LONDON — First-half profits at Compagnie Financière Richemont SA — parent of Cartier, Dunhill and Chloé — jumped 10.1 percent to 709 million euros, or $1.01 billion, on the back of strong sales gains worldwide, and in China in particular.
The company said sales ended Sept. 30 rose 29.3 percent to 4.21 billion euros, or $5.98 billion, with double-digit growth in all product categories and all geographic regions, except for Japan. Dollar figures have been converted from euros at average exchange rates for the six-month period.
Sales rose even as Richemont raised its retail and wholesale prices, to compensate for currency fluctuations such as the growing strength of the Swiss franc. The majority of Richemont’s manufacturing is done in Switzerland. “Volatility, we now believe, is a daily part of our lives,” said Gary Saage, chief financial officer of Richemont, during a results presentation broadcast Friday.
Sales in the Asia-Pacific region, which is primarily driven by Mainland China, showed the most robust growth in the period, advancing 48 percent. The company said Mainland China is now Richemont’s third-largest market after Hong Kong and the U.S. During a conference call Friday, Saage noted that of the 43 new stores Richemont opened during the first half, most were opened in Asia. “Generally, we still believe that retail should be expanded in the growth markets and not so much in the West,” said Saage.
Sales in the Americas climbed 23 percent, driven primarily by high jewelry turnover and a generally strong market, Richemont said. Saage said retail purchases by domestic tourists traveling within the U.S. impacted positively on sales in the region, with sales of Van Cleef & Arpels jewelry performing particularly well.
Sales in Europe were up 20 percent, with growth driven mainly by those traveling in the region and the growth of Net-a-Porter, while growth in Japan increased by 8 percent. Saage said in these two territories, growth was “broad based” across Richemont’s categories.
Of Richemont’s products, sales at its jewelry division — which comprises Van Cleef & Arpels and Cartier — grew 34 percent to 2.17 billion euros, or $3.08 billion, driven by demand for high jewelry and more accessible pieces. Sales at the company’s specialist watch division, which includes houses such as Panerai, IWC and Piaget, grew 30 percent in the six months to 1.17 billion euros, or $1.66 billion, while Richemont’s other businesses, which include Net-a-Porter, Lancel and Chloé, rose 25 percent to 544 million euros, or $772 million. Richemont said sales growth at Net-a-Porter was “well above the group’s average,” but noted that the retailer had incurred a loss of 22 million euros, or $31 million, during the half as a result of amortization of intangible assets and costs associated with the expansion of its platforms in the U.K. and the U.S. Overall, the fashion and accessories businesses generated profits of 23 million euros, or $32 million, with Alfred Dunhill and Chloé performing particularly well.
Operating profit for the six months rose 41.1 percent to 1.08 billion euros, or $1.53 billion. Richemont said operating profit growth was higher than net profit growth in the period due to the nonrecurrence of an extraordinary item in the corresponding period last year.
Johann Rupert, Richemont’s executive chairman and chief executive officer, said the strong sales trends in the six months continued through October: Sales in the month were 28 percent higher than in October 2010, with good momentum in the retail and wholesale channels. But in light of current economic conditions, Rupert sounded a note of caution for the rest of the fiscal year.
“For the second half of the financial year, we face both the impact of global economic problems on the luxury goods industry in general, and the demanding comparative figures against which group sales will be measured,” Rupert stated.
He added, however, that operating profit for the full year is expected to be “significantly” higher than last year. “Our confidence in our business model and the strength of our balance sheet will enable us to continue to invest for the long term, despite the very worrying world economic environment,” Rupert added.
Richemont’s shares finished up 1.3 percent at 48.7 Swiss Francs, or $54.30 a share Friday.
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