Richemont’s H1 results disappoint despite profits doubling

Worldwide
Published:  13 November, 2018

Net profit for the Switzerland based luxury holding stood at €2.25 billion in the six months period ending September 30, compared with €974 million in the same period of the Group’s fiscal 2018, but mainly due to a revaluation of existing shares of the recently acquired Yoox-Net-A-Porter (YNAP) business.

Richemont’s profit for the period increased to €2.253 billion, primarily as a result of a post-tax noncash gain of €1.378 billion, gain on the revaluation of existing YNAP shares. Excluding this gain, profit for the period was -10% lower at €875 million. Revenue for the first six months of the Group’s fiscal 2019 rose to €6.81 billion (+8%), excluding Richemont's newly consolidated online-distributors (YNAP and Watchfinder) division. However, operating profit decreased -3% to €1.13 billion in the period. “The €36 million decline versus the first half of last year is more than explained by charges of €159 million comprised of, on the one hand, amortisation of intangible assets, principally related to the acquisition of YNAP and Watchfinder, and on the other hand, one-time acquisition and disposal-related charges mainly linked to the Lancel disposal”, said Burkhart Grund, CFO, Richemont, during the interim results presentation on November 9.

Overall, sales for the first half increased +24% at constant exchange rates (+21% at current), including the sales of YOOX NET-A-PORTER and Watchfinder, which helped the online retail sales jump from 1% to 14% of total Group sales. Excluding the Online Distributors, sales for the period increased +8% at constant exchange rates (+6% at current) with most regions and all business areas recording growth, led by double-digit increases in jewellery and in the Group’s directly operated boutiques. Richemont’s sales were mainly boosted by the jewellery and watches categories, which remain the Group’s largest product lines, but each contributed to less than 40% of Group sales, compared to 39% and 43% respectively a year ago.

Sales for the Group’s Specialist Watchmakers category, which consolidates the results of eight watch Maisons, increased +2%, “with strong growth in Asia Pacific, good performance in Japan and stable sales in the Americas”, said Sophie Cagnard, Corporate Communications Director, Richemont. However, operating margin decreased by 80 basis points to 18.5%, impacted by stock provisions linked to the physical return of inventory buy-backs.

The Group’s Fashion & Accessories businesses grew +1%, including the impact of the disposals of Shanghai Tang in July 2017 and Lancel in June of this year. Excluding these disposals, sales are said to have increased by mid-single digits, led by Europe and the Americas. The operating loss was €46 million, including one-time charges of €58 million related to the Lancel disposal. Excluding these one-time items, the operating results were positive, said Cagnard. The Montblanc and Peter Millar brands are reported to have “enjoyed healthy increases in sales”, with growth at Montblanc driven by large leather goods and writing instruments. Higher clothing sales were supported by store openings and by the success of shoes, eyewear and fragrances.

Richemont’s shares were trading about -5% lower as results failed to impress market analysts. The Swiss Group has blamed the slowdown in China for the drop in luxury demand, particularly in the watch segment.