May 21, 2021
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Richemont profits surge despite sales dip, fashion labels get online boost

May 21, 2021

The trading environment may have been volatile but luxury giant Richemont still managed to see net profit rising almost 40% in the financial year to the end of March, beating forecasts by a wide margin.

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That said, due to the temporary closure of points of sale, logistics centres and manufacturing sites, as well as the pandemic-linked halt in international tourism, sales fell by 25% currency-neutral (CN) and by 26% at current exchange rates (CER) in the first half of the financial year.

But as initial lockdown measures began to ease, sales grew by 17% CN and 12% CER in H2. And Q4 saw sales growth of 36% and 30%, which meant the overall declines for the year were just 5% CN and 8% CER. 

It also meant that the company is clearly on a powerful recovery trajectory and it said it has made a “strong start to the new financial year, with accelerating trends across all business areas”.

Looking more closely at the year’s figures, sales fell to €13.144 billion with operating profit down 3% to €1.478 billion. Net profit, as mentioned, rose healthily with a 38% increase to €1.289 billion. Total Retail channel sales rose 2% CN, or fell 1% CER, to €7.248 billion in the year. Online Retail rose 9% and 6% to €2.794 billion and Wholesale/Royalty income fell 25% and 27% to €3.102 billion.

The strong performance was led by its Jewellery Maisons, which include Cartier, as well as by Online Retail (dominated by the Yoox Net-A-Porter operation). In fact, it saw triple-digit growth in group Maisons’ e-tail sales, which it said “underscores the success of our digital transformation”.

Overall Online Retail sales accounted for 21% of group sales and the company is diving ever deeper into the digital world. During the year, that included a €253 million investment in convertible notes issued by Farfetch and a deepening of its relationship with Alibaba that has led to 11 flagship stores opening on the Tmall Luxury Pavilion, including for Net-A-Porter, Chloé and Dunhill.

Even though physical spaces were closed for much of the year in multiple markets, the company said it saw “solid retail sales” and the figures above support that view. 

But it saw lower sales at its Fashion & Accesories Maisons overall, mainly due to wholesale declines linked to the pandemic, and travel retail’s problems, even though online retail sales grew to 17%.

The company said that after “years of underperformance, we expect these Maisons to benefit from an enhanced ‘route to market’ provided by new digital platforms.”

The Jewellery Maisons’ even managed to grow sales beyond pre-Covid levels and increased the operating margin to 31%, supported by strong double-digit sales growth in the second half of the year.

Asia Pacific was also a big contributor to its success and China played a major part in the region’s 19% sales growth with year-on-year sales (CER) rising by triple-digits in the fourth quarter. But European sales fell 31% while the Americas dropped 15% and Japan alone was down 22%.

In the results, chairman Johann Rupert also paid tribute to the late Alber Elbaz, describing him as “incredibly sensitive and caring” with “genuine empathy [who] possessed great wit, talent and creativity”.

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