Richemont buoyed by Jewellery

Richemont has announced “solid” results for the year ended March 31, 2021, with a significant upturn in business despite the current climate. Following a 26% contraction in sales over the first half of the financial year, due to closures of points of sale, logistics centres and manufacturing sites, as well as the halt in international tourism, the situation improved in the second half-year when sales increased 12%. Fourth-quarter sales (January-March 2021) rose by 30%. Overall, Richemont ended its financial year with sales down 8% at €13.15 billion and operating profit falling 3% to €1.48 billion. Profit for the year increased considerably, gaining 38% to reach €1.29 billion, positively impacted by net finance income. There was also a “significant increase” of 41% in net cash position to €3.39 billion.

Accelerated digital transformation

Richemont’s jewellery Maisons contributed strongly to results, with sales “exceeding pre-Covid levels.” Cartier, Van Cleef & Arpels and Buccellati delivered 3% sales growth to €7.46 billion and an 11% rise in operating profit to €2.3 billion. Operating margin gained 220 basis points at 31%. As expected, the best performance per region came from Asia-Pacific, with China strongest of all. Sales in the region gained 19% and Asia-Pacific accounted for 45% of group sales. In all other regions, figures were down. Results per distribution channel reflect the further acceleration in Richemont’s digital transformation. Online retail progressed by triple-digits in all the main markets to account for 7% of group sales, excluding Online Distributors (Net-A-Porter, Mr Porter, Yoox and The Outnet). Add them to the mix, and Richemont makes 21% of its sales online.

The group’s Specialist Watchmakers (A. Lange & Söhne, Baume & Mercier, IWC, Jaeger-LeCoultre, Panerai, Piaget, Roger Dubuis and Vacheron Constantin) had a tougher year, reflected in the 21% decline in sales to €2.25 billion. Operating profit came to €132 million (-57%) with an operating margin down to 5.9%. Despite this, Richemont’s Chairman, Johann Rupert, described the group’s watchmaking division as being “in a very healthy state,” citing the reinforcement of iconic collections and greater direct engagement with the end customer, including through a stronger presence on China’s Tmall Luxury Pavilion. Commenting the results, Johann Rupert noted that “the quality of the Specialist Watchmakers network has improved, and subsequently 73% of the division sales are now through internal and franchise stores. Sales to our local clientele in our retail network grew by double-digits, which partly mitigated the contraction in inbound tourism.” The division has shown an upturn in activity since end 2020, trading above 2019 levels over the first four months of the calendar year, when corrected for stock rebalancing.

Investor confidence

This leaves the strategic channel of Online Distributors, still in the red with an operating loss of €223 million. “Other” activities, which cover fashion and accessories, retail estate and watch component manufacturing, also reported an operating loss, which increased to €241 million. This widely anticipated underperformance didn’t deter investors: Richemont’s stock price gained 8% over two days. Analysts have also set a higher price target, confident in Johann Rupert’s declaration that Richemont will continue its transformation through “decisive action with a focus on digital initiatives, customer-centricity and forging strategic partnerships.”