LONDON — First-half sales and profits at Compagnie Financière Richemont will be significantly higher than expected, due chiefly to the non-recurrence of exceptional inventory buybacks, improved trading and currency changes, the company said Tuesday.
According to Richemont, in the six months ended Sept. 30, sales rose 10 percent on a reported basis and 12 percent on a constant currency basis compared with the same period last year. Richemont’s operating profit for the six months is likely to show a gain of approximately 45 percent against the comparative period, while net profit is set to rise by about 80 percent.
The parent of brands including Cartier, IWC and Van Cleef & Arpels said the increases predominantly reflect the nonrecurrence of the exceptional inventory buybacks in the prior-year period, improved trading performance and the positive net impact of movements in period-end exchange rates.
As reported, as high-end watch sales slowed, Richemont decided to buy back inventory from its wholesale partners to ensure that stock did not languish on the shop floor or enter the gray market or discount channels. The company said after taking back the watches, it would remove any precious gems and components and melt down the metal. According to Richemont’s latest trading update last month, that period of stock buybacks has come to an end as watch market returns to growth, albeit at a slower pace than in previous years.
The company is listed on the Swiss Stock Exchange, which requires that issuers make an announcement where the foreseeable profit or loss for a given period is expected to deviate significantly from the prior year’s numbers.
In a flash report following Tuesday’s announcement, Luca Solca, sector head of luxury goods at Exane BNP Paribas, said the improvement in Richemont’s numbers has been largely reflected in the share price. “Richemont’s share price has already moved up materially in the past few months,” he said, adding that no further top-line growth acceleration at Richemont seems apparent.
Richemont will report first-half numbers on Nov. 10.