Luxury giant Richemont sees profit soar, but disappoints
Richemont, the world's second-biggest luxury goods group, on Friday posted a 67-percent higher annual net profit, boosted by a lucrative merger, but fell slightly short of analyst expectations.
Richemont, second only to France’s LVMH in the luxury world, posted a net profit of 2.2 billion euros ($2.5 billion), with its coffers padded by the merger of its online sales platform Net-a-Porter and an Italian counterpart, Yoox.
The merger took place in October, handing Richemont 50 percent of the new entity, although only 25 percent of voting rights.
The operation alone translated into a net gain of 639 million euros, and Richemont said its net profit during its 2015/2016 fiscal year, which closed on March 31, was also boosted by a favourable comparison to the previous year, which was hard-hit by a stronger Swiss franc.
The company meanwhile saw a six-percent hike in sales to 11 billion euros during its fiscal year.
But analysts polled by Swiss financial news agency AWP had expected to see a net profit of 2.3 billion euros and sales of 11.1 billion.
Following the news, Richemont saw its share price open more than five percent lower at 58.20 Swiss francs a piece.
But by mid-morning it was trading down just 0.8 percent, at 61.10 francs, as the Swiss stock exchange’s main SMI index swelled more than one percent.
The drop likely also reflected Richemont’s dreary outlook.
While the Geneva-based company, which owns top global brands such as Jaeger LeCoultre, Van Cleef & Arpels and IWC, reported double-digit growth during the first half of its fiscal year, the second half was far weaker amid an overall declining appetite for luxury items, and especially high-end watches.
For April, the first month of its current fiscal year, sales plunged 18 percent, with declines reported in all regions, the company said.
“In the near term, we are doubtful that any meaningful improvement in the trading environment is to be expected,” Richemont chairman Johann Rupert acknowledged.
The company nonetheless proposed raising its dividend six percent to 1.70 Swiss francs per share for the last fiscal year, up from 1.60 Swiss francs a year earlier.