LONDON — The Christmas season wasn’t particularly jolly for Compagnie Financière Richemont, parent of brands including Cartier, Van Cleef & Arpels, IWC and Dunhill, as exchange rates hampered third-quarter sales.
This story first appeared in the January 17, 2014 issue of WWD. Subscribe Today.
In the three months to Dec. 31, sales rose 2.8 percent to 2.94 billion euros, or $4 billion, with the company notching strong demand from the Americas and Japan, and lower sales in Mainland China and sluggish wholesale growth.
Dollar figures are calculated at average exchange rates for the three-month period. At constant exchange rates, Richemont’s third-quarter sales rose 9 percent in the pre-Christmas quarter.
Reported sales were 2 to 3 percent below Citi analysts’ projections after a worse-than-expected impact from exchange rates, an issue the company had flagged during a results presentation in November.
Richemont, which is based in Switzerland, reports its results in euros. Earlier this week, Burberry Group’s chief executive officer Angela Ahrendts warned that at current levels, exchange rates will be “a significant headwind in the second half and beyond.”
At constant exchange rates, however, Richemont’s 9 percent sales growth was slightly below Citi’s expectations of 10 percent and the 11 percent consensus.
“While [Q3 sales were] achieved against an easier comparative, it is a respectable outcome, in our view, given the recent broad-based luxury industry demand slowdown,” wrote Thomas Chauvet in a report for Citi Research on Thursday.
Chauvet added, however, that the market “will be disappointed by the apparent slowing revenue momentum.”
On Thursday, Richemont’s stock closed down nearly 2 percent at 87 Swiss francs, or $96 at current exchange.
The third quarter appeared to be off to a strong start: In November, Richemont reported that October sales had increased by 6 percent at actual exchange rates, with Asia-Pacific in particular delivering “positive retail developments and exceptionally high jewelry sales.”
October retail sales were strong in all regions, outperforming the wholesale channel, where reorder levels remain “cautious,” Richemont said in November.
In its third-quarter trading update on Thursday, the company noted the quarter was “in line” with trends seen in the first six months, when revenue climbed 4.3 percent, and that slower growth in the wholesale channel reflected caution among the group’s business partners, primarily in Asia-Pacific.
Retail sales at constant exchange rates were up 14 percent, compared with wholesale, where they rose 3 percent.
By category, jewelry sales advanced 10 percent at constant exchange, fueled by strong growth at Cartier and Van Cleef & Arpels; specialist watchmakers 9 percent, and other brands — which includes the Net-a-porter Group — climbed 9 percent. Sales at Montblanc inched up 1 percent.
By region, Japan posted the strongest growth at constant exchange rates, with sales up 13 percent; followed by the Americas, 12 percent; Europe and the Middle East, 9 percent, and Asia-Pacific, 6 percent.
Richemont called the performance in Europe and the Middle East “satisfactory,” with sales continuing to benefit from visitors to the region’s major tourist destinations.
Domestic purchases in Japan were strong, although the rate of growth slowed down compared with the first six months.
In Asia-Pacific, Richemont said that growth remained relatively consistent with the trend seen in the first six months of the current financial year, taking into account less challenging comparable figures from last year.
Richemont’s net cash position on Dec. 31 was 4.3 billion euros, or $5.86 billion.