May 12, 2017
Richemont cautious after FY net profit miss, sales drop
May 12, 2017
Cartier owner Richemont said it expects the trading environment to stay volatile after net profit slid more than the market expected but sales growth picked up towards the end of its fiscal year to March.
"Volatility and uncertainty in the geopolitical and trading environments are likely to prevail," the world's second-biggest luxury goods group said in a statement on Friday.
Luxury watchmakers have been grappling with dwindling demand in their biggest markets, Hong Kong and the United States, but sales improved of late thanks to easier comparisons and what appears to be a sustainable recovery in mainland China.
The world's biggest luxury goods group, LVMH, last month reported underlying sales growth of 11 percent in its watch and jewellery business in the first quarter of 2017, helped by a recovery in Europe and Asia.
Sales at Richemont fell 4 percent at constant exchange rates in the year to March, missing expectations in a Reuters poll of analysts, but with a clear improvement in the second half thanks to a recovery in the United States and strong growth in China.
At actual exchange rates, sales also declined 4 percent to 10.65 billion euros ($11.58 billion), just slightly below a 10.68 billion euro forecast in the poll.
Jewellery sales growth, mainly under Cartier and Van Cleef & Arpels brands, slowed to 7 percent at constant currency from 8 percent in 2015/16.
Sales of watches, including IWC and Piaget timepieces, were still under pressure, declining 15 percent, on top of an 8 percent drop the previous year.
Net profit slid 46 percent to 1.21 billion euros, mainly due to a one-off gain related to Net-a-Porter in the previous year, short of a 1.34 billion euro forecast in the poll.
The operating margin deteriorated to 16.6 percent from 18.6 percent a year ago, a situation Richemont is addressing with cost-saving measures and a management reshuffle.
Its shares were indicated 0.2 percent firmer in pre-market activity, in part due to news of a new share buyback.
"Free cash flow generation continues to be very strong, a clear positive. The share buybacks add icing on the cake," Luca Solca, an analyst with Exane BNP Paribas, said.
The company proposed raising its dividend 6 percent to 1.80 Swiss francs per share.
($1 = 0.9200 euros)
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