Richemont, the Swiss luxury goods group that owns brands like Cartier, A. Lange & Söhne, IWC, Montblanc and Piaget among others, has reported a 4 per cent decline in sales for the year ending March 31, 2017. Sales in Middle East and Africa region are down 10 per cent from last year to €885 million based on constant exchange rates and is being attributed to negative currency movements weighing both on tourists and local spending.
However, the silver lining to this story is the fact that the US and China, two important markets, have shown signs of a recovery. The Americas region is actually up two percent this year. Europe accounted for 29 per cent of overall sales. Compared to a 10 per cent increase in the prior years, full year sales have declined 8 per cent at constant exchange rates, having improved from a 17 per cent decline in the first half of the year. The UK enjoyed double digit growth in sales following Brexit but France and Switzerland have registered the largest contractions.
According to the results, sales decreased by 4% at both actual and constant rates to €10.6 billion. Excluding the impact of the previously announced exceptional inventory buy-backs, sales declined by 2% at constant rates. The sales of jewelry, leathers goods and writing instruments have shown an increase in sales.
However, profit is down a whopping 46 per cent to €1.2 billion. This figure is largely due to the one-off charge associated with the merger of Net-A-Porter with Yook. Ignore this exceptional item, and the net profit has still dropped 24 per cent. Richemont's group-wide sales and gross profit are both only down 4 per cent and operating profit is down 14 per cent.
Richemont’s retail channel generated a 4 per cent sales increase after a decline in the first half of the year. Retail sales were impacted by the net closing of 38 internal boutiques, leading to a total network of 1,117 internal stores. The Group’s wholesale business, including sales to franchise partners, reported lower sales for the year. Sales were partially impacted by inventory buy-backs, the majority of which occurred in the first half of the year.
The sale of Richmont’s Specialist Watchmakers’ division decreased by 11 per cent to €2.4 billion. The lower demand for fine watches together and the impact of buy-backs has results in a 57 per cent decline in segment.
After CEO Richard Lepeu retired on March 31 this year, Richemont’s new senior management team includes Georges Kern, who is responsible for our watchmaking businesses, digital and marketing and Jérôme Lambert, who has responsibility for the Richemont regional platforms and services and for the Group’s other businesses.