YNAP acquisition boosts sales in Richemont’s first half
Luxury giant Richemont, the company behind brands like Cartier and Piaget, reported a mixed bag of earnings at the end of last week. Sales rose, but profitability fell, and the company’s revelation that Chinese demand was cooling (that’s a relative term – Richemont still saw high single-digit growth in the country) has sent the share price down. The China worries caught the eye of the market, and a number of luxury companies suffered as a result – but it’s worth noting that multiple other big luxury names (like LVMH) have reported exactly the opposite: that luxury demand in the country remains high.
Richemont’s shares fell after the company posted its latest quarterly earnings report
Source: Yahoo Finance
For the first half of this year, Richemont said that sales rose by 21% (at constant currency, that becomes 24%) from same period in the previous year. This is an impressive figure – but it’s significantly boosted by the addition of Yoox Net-a-Porter (YNAP). Stripping out YNAP’s business, Richemont has seen an 8% sales rise, year on year. Profit, meanwhile, rose by a staggering 131% over the same period. However, this is largely down to a “1,378 million euros post-tax non-cash accounting gain on the revaluation of existing YNAP shares.” Strip that out, and profitability declined by 10%.
The big drag on the company’s share price, however, was the announcement that Chinese demand had cooled. The company is now seeing high single-digit demand, which it describes as “more normal” than the double-digit figures it previously posted. Richemont says this overperformance was a reflection of the fact that the crackdown on luxury in the country had eased, and consumers were making up for lost time. Today, the situation is different. Chief financial officer Burkhart Grund told reporters: “everybody’s concerned about trade wars.”
Reiterating the company’s mission, chairman Johann Rupert issued the following statement: “Amidst growing volatility in consumer demand, partly attributable to an uncertain economic and geopolitical environment, we maintain confidence in our ability to realise our long-term ambitions, supported by the strength of our balance sheet. Our ambition remains to ensure that we continue to create, manufacture and sell exquisite products with a high level of beauty, craftsmanship, patrimony and passion while maintaining continued engagement, relevance and appeal for our clients.”
Dominion holds Richemont in its Global Trends Luxury Fund
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