LONDON — Solid sales in the U.S. coupled with a demand for jewelry helped Compagnie Financière Richemont AG post better-than-expected results for the first half ending Sept. 30.
The Swiss luxury goods group said in a statement Thursday that net profit fell 18.5 percent to $132 million from $162 million, owing chiefly to a double-digit decrease in operating profit. Sales declined 3 percent to $1.78 billion from $1.84 billion euro. Excluding the negative impact of exchange rates, however, sales increased by 1 percent.
All figures are converted from the euro at current exchange rates.
Despite the net drop, European financial analysts said they were "encouraged" by Richemont’s numbers, which beat their expectations.
"Overall, these results were better than we had expected. The sales figures — especially the ones coming out of the U.S. and concerning jewelry — are encouraging," said Sagra Maceira de Rosen, head of luxury goods at J.P. Morgan. She had projected a 4 percent decline in sales, and she wasn’t the only one bracing for bad news. Merrill Lynch was expecting a 5 percent decline and Lehman Bros. a 4.5 percent drop.
However, Johann Rupert, executive chairman of Richemont, said the results were in line with the company’s expectations, and added he was cautious about the second half.
"We live in a period of chronic uncertainty in terms of global events," he said, adding that he expected the rate of decline in operating profit to improve during the next six months. "Such a view is, of course, predicated upon there being no further deterioration in market sentiment as a consequence of events outside our control."
Fully diluted earnings per share fell 5 percent to 72 cents from 75 cents, but they were helped along by Richemont’s stake in British American Tobacco. The group’s equity from its shares in the company rose 4 percent to $270 million.
Jewelry sales, mainly those of Cartier, Van Cleef & Arpels and Piaget, grew by 1 percent to $397 million from $394 million in the period, while watch sales declined by 3 percent to $847 million from $877 million. The company said sales of steel, and steel-and-gold watches performed better than ones made from precious metal sand jewelry."The growth in jewelry confirms the resilience of genuine luxury goods," said Andrew Gowen, luxury analyst at Lehman Bros. "If you look at the numbers, Cartier has been consistently resilient for the past decade."
Sales of clothing and other divisions dipped 4 percent to $285 million from $298 million, although men’s wear sales at Dunhill and Hackett were strong, the company said. Chloé also performed well. Fragrance and eyewear sales declined because of the fall in tourism.
Sales of writing instruments rose 1 percent to $130 million from $129 million, while leather goods retreated 9 percent to $125 million from $138 million.
The Americas were the only region to show growth. Sales grew by 2 percent to $338 million from $333 million. In dollar terms, however, sales increased by 10 percent thanks mainly to Cartier and Montblanc. During a meeting with analysts, however, the company said the double-digit increase in the Americas was due to "easier comparisons" with the previous period.
While sales in Asia declined by 3 percent to $667 million from $688 million, the company said sales in Japan and the rest of Asia grew by 5 percent at comparable rates of exchange. In Europe, a slowdown in tourism and depressed market conditions dented sales. Sales in that region fell 4 percent to $779 million from $815 million.
Operating profit slid 27 percent to $185 million from $253 million because ofthe decline in sales, an increase in operating expenses and a 4 percent dip in gross margin because of the strong Swiss franc.
Operating expenses rose 3 percent to $964 million from $939 million, because of the company’s ongoing efforts to expand its retail network and improve after-sales service. Analysts, however, said they were satisfied with how Richemont is handling its costs. "Costs are under control and, structurally, we can say that Richemont is a better company now than it was 12 months ago, and not many companies can say that?" Gowen said.
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