LONDON — Compagnie Financière Richemont may have witnessed a strong start to fiscal 2017-18 — but no one is tossing the confetti just yet.In the first five months, strong jewelry sales and easier comparisons with the previous year drove growth at Richemont, parent of brands including Cartier, IWC and Van Cleef & Arpels, up 10 percent.The company said in a trading update that sales grew 12 percent at constant rates for the April to August period. Stripping out the impact of exceptional inventory buy-backs of watches in the comparative period last year, constant currency sales increased by 7 percent.Following a difficult year that involved layoffs, watch buybacks, retail and wholesale readjustment and patchy demand in China, growth appears to be getting back on track. The company said sales increased in all regions, led by Asia-Pacific, which saw a 22 percent increase.China and Hong Kong notched double-digit increases, Richemont said. They were the same markets where the group had bought back a large part of the watch inventory last year after demand for top-tier timepieces ground to a halt.Growth in Europe was 3 percent, marked by the “emerging negative impact of a strong euro on tourist spending,” while in the U.K., sales grew in the double digits, benefiting from favorable currency movements.In Japan, growth reflected higher domestic and tourist spending, while sales in the Middle East showed subdued growth, impacted by geopolitical uncertainties.The 11 percent increase in wholesale sales primarily reflected the impact of the nonrecurrence of the exceptional inventory buy-backs. By category, jewelry showed the highest growth, climbing 16 percent, while the watch category was up 6 percent.Growth in the first five months of fiscal 2017-18 was in stark contrast to last year when sales fell 3.9 percent to 10.65 billion euros, and profits slid 45.6 percent to 1.21 billion euros. The second half of last year had already begun to show signs of improvement, with a rebound in mainland China and the U.S.In a flash statement following Wednesday's trading update, Luca Solca of Exane BNP Paribas emphasized that the results reflected a “significant one-off effect” from the watch inventory buy-backs.“The trend is good, watches sell-out in Asia and Hong Kong is turning positive — but this is more of a step-by-step progress than a V-shaped recovery,” he said. In a separate note, Barclays called the Richemont recovery strong, also noting that exchange rate fluctuations had dragged down growth by 2 percent.While Vontobel was upbeat about the five-month results, it said Richemont will see a sales slowdown in the second half as that period will no longer compare as favorably with the corresponding period last year. The inventory buy-backs had occurred in the first half of last year.The bank added that due to strong growth in jewelry, it plans to increase its estimates for the year and reiterated its "buy" rating on the stock.Richemont’s annual general meeting took place in Geneva on Wednesday, and the company said that shareholders had approved the results for the year, including the proposals of the board of directors.As reported, the company’s chairman Johann Rupert has stacked the board with a new generation of directors, many of whom are young, tech-savvy and female.The company also confirmed that Georges Kern’s successor as head of watchmaking at Richemont had not yet been named. As reported, Kern left Richemont over the summer to become chief executive officer of Breitling as well as a shareholder in the company.
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