Richemont takes a hit in Zurich; jewellery sales fail to shine in the second quarter

(Il Sole 24 Ore Radiocor) – Richemont struggles on the Zurich Stock Exchange following the publication of its first-half results. The results of the luxury group, which owns Cartier, Piaget, Buccellati, Van Cleef & Arpels and Vhernier, were generally better than expected, but in the second quarter the jewellery division, the group’s mainstay, recorded lower-than-expected growth. In the quarter ending 30 September, Richemont posted an overall 13 per cent increase in turnover at constant exchange rates to €5.95 billion. This figure exceeds analysts’ estimates, which had been for €5.89 billion. However, the market did not fail to notice that the jewellery division, which accounts for around 75 per cent of turnover, recorded a 14 per cent increase in sales for the quarter, which was lower than the 16 per cent expected on average by analysts. The specialist watchmaking division recorded a 12 per cent increase. Richemont, which does not publish detailed quarterly results, also announced a rise in net profit for the first half of the year to €2.53 billion (41%), exceeding the €2.26 billion forecast by analysts. Revenue rose by 16 per cent to 12.3 billion, “with double-digit increases in all regions except the Middle East and Africa” and a gross margin of 66.5 per cent, up from 65.3 per cent. Operating profit improved by 33 per cent to 3.1 billion, with a margin of 25.5 per cent, up from 22.2 per cent. “The group recorded a solid first half, driven by the excellent and consistent performance of our jewellery houses, the robust growth of our specialist watchmakers and the strong performance of our fashion and accessories houses, despite a challenging fashion market,” said Johann Rupert , chairman of Richemont, in a statement.

According to analysts at Citi, Richemont has come through a volatile and generally disappointing earnings season in the luxury sector with solid sales in the second quarter of its financial year. However – they note – the jewellery division, which is crucial to the group, recorded sales growth of 14%, below consensus estimates which had forecast a 16% increase, and marking a slowdown following the 24% growth recorded in the first quarter. “Despite persistent concerns about the normalisation of growth in the jewellery sector, Richemont remains one of the undisputed leaders in luxury growth and a structurally stronger company,” the Citi analysts emphasised. Jefferies reiterated its ‘buy’ recommendation on the share, with a target price that remains at 200 Swiss francs. Bernstein also confirmed its ‘buy’ rating with a target price of 240 francs. Finally, it is worth noting that during a press briefing, CEO Nicolas Bos declined to comment on the possibility that the group might join a consortium to acquire the diamond producer De Beers. Bos did, however, emphasise that Richemont considers natural gemstones to be of great importance to its collections. “We have no comment to make on various ongoing or future agreements,” Bos told journalists when asked about Richemont’s potential participation in a consortium seeking to buy De Beers from its majority shareholder, Anglo American. Natural gemstones “are very, very important components of our jewellery collections and will remain so in the future,” Bos added.