Richemont posts sales growth, profit increases 38 percent
Richemont’s fourth quarter sales increased by 30 percent and 36 percent, at actual and constant exchange rates, respectively. Overall, the company said that the decline in sales for the year was contained to 8 percent at actual exchange rates and to 5 percent at constant exchange rates to 13, 144 million euros.
Profit for the year increased by 38 percent to 1, 289 million euros, while earnings per share increased by 39 percent to 2.296 euros on a diluted basis.
“Following a sharp decline in the first half of the financial year as the health crisis spread across the globe, sales recovered throughout the year led by the jewellery maisons, online retail and Asia Pacific. At actual exchange rates, sales in Asia Pacific grew by double digits, underpinned by strong sales in mainland China due to a strong local presence of our maisons,” said Johann Rupert, chairman, Compagnie Financière Richemont SA.
Review of Richemont’s performance The company added that online retail sales grew by 6 percent for the year, supported by triple- digit increases at the maisons. There was a 27 percent decrease in wholesale sales reflecting exposure to travel retail, as well as multi-brand retailers’ lower exposure to online retail and relatively longer temporary store closures in Europe versus other regions.
Richemont said that the jewellery maisons sales exceeded pre-Covid levels with 3 percent growth, highlighting the continued strength of Cartier and Van Cleef & Arpels. The other business areas experienced a decline in sales for the full year, with all business areas returning to growth in the latter part of the year.
At 7, 861 million euros, gross profit was 9 percent lower than the prior year, and gross margin stood at 59.8 percent of sales. Operating margin increased to 11.2 percent compared to 10.7 percent a year ago with operating profit being 3 percent lower to 1, 478 million euros.
Richemont’s performance across geographies
The company’s sales in Europe, down 30 percent, were the most severely impacted by the pandemic, given travel restrictions, curfews and the temporary closures of stores as well as a number of distribution centres in the first quarter of the financial year. The region also suffered from a halt in tourism, which was partially mitigated by increased spending from domestic clientele. All main markets excluding Russia recorded double-digit declines.
However, sales recovered in the final quarter of the financial year, narrowing the year-on-year sales gap to 7 percent.
Sales in Asia Pacific increased by 22 percent, with three consecutive quarters of growth during the fiscal year and a 106 percent increase in the final quarter of the financial year. Triple-digit sales growth in mainland China more than offset declines in locations affected by a halt in tourism, notably Hong Kong SAR and South Korea.
Sales in the Americas declined by 10 percent. However, the region then benefited from three consecutive quarters of improvement, with 21 percent growth in the fourth quarter of the financial year.
Sales in Japan decreased by 21 percent due to the Covid-19 outbreak and its resulting impact on trading conditions. However, in the third quarter of the financial year sales turned positive, with 15 percent growth in the fourth quarter.
Sales in the Middle East and Africa increased by 4 percent for the financial year.
Retail sales grew by 2 percent, driven by high-single digit growth at the jewellery maisons in an environment affected by recurring periods of store closures due to the Covid-19 pandemic. Fourth quarter sales saw a rebound with 62 percent and 22 percent growth compared to 2019.
Online retail generated 9 percent sales growth from group maisons and online distributors, with increases across all regions. In the fourth quarter of the financial year, sales rose by 22 percent, partly supported by new flagship stores on Tmall Luxury Pavilion.
The group’s wholesale sales decreased by 25 percent, with fourth quarter sales up by 1 percent year-on-year.
Richemont’s jewellery division witnesses business growth
The company’s jewellery maisons delivered 3 percent sales growth at actual exchange rates and 7 percent at constant exchange rates. The increase in sales was driven by solid retail sales and a triple-digit acceleration in online sales. The company saw strong acceleration in the second half of the year, finishing the year with a 54 percent sales rebound in the fourth quarter of the financial year. Overall, jewellery sales grew vigorously, with watch sales contracting moderately.
Performance was driven by double-digit sales increases in Asia Pacific and the Middle East and Africa, with lower sales in other regions.
The 21 percent decline in specialist watchmakers’ sales reflected a 38 percent decrease in sales in the first half of the financial year followed by a marked improvement in the second half of the year, with sales up 10 percent in the final quarter of the year. The double-digit sales progression recorded in Asia Pacific for the year partially mitigated a contraction in the other regions.
The maisons’ and online distributors’ business area saw 9 percent decline in sales. However, the division saw an improvement in performance in the rest of the year, with sales up 3 percent in the fourth quarter.
Sales in the other business area were 25 percent lower than the prior year, although the division saw a year-on-year sales increase of 12 percent in the fourth quarter of the financial year.
In view of the group’s strong results and improving economic environment, the company’s board has proposed a dividend of 2 Swiss francs per ‘A’ share/10 ‘B’ shares.