Richemont, the world’s second-biggest luxury goods group, said on Thursday higher cost and lower jewellery and leather goods sales caused annual operating profit to fall by a third and it was wary of a quick recovery.
But financial markets had largely expected the 32% fall and the cautious outlook. Shares in Richemont, also listed on Johannesburg, rose 0,8% to 38,15 Swiss francs in early trade, reversing losses in the runup to the report.
”The Richemont results were okay, but the outlook remains cautious,” said a trader.
Chief Executive Johann Rupert said sales in April and May — the first two months of the 2002/03 business year — were flat.
Richemont, whose brands include Van Cleef & Arpels, Piaget and Montblanc, said the closely watched operating profit figure plunged to 482-million euros in 2001/02. This was above the 475-million financial analysts had expected.
The group cited a sales drop at its Cartier jewellery unit and leather goods businesses, while costs rose 14%, partly due to continued investment in manufacturing and distribution and the integration of three newly acquired brands — IWC, Jaeger LeCoultre and Lange & Soehne.
The earnings slump had been well flagged by the company. The general drop in sales due to a global economic downturn, exacerbated by effects of the unprecedented attacks of September 11, was also evident in the results of its rivals.
Sector leader LVMH suffered a 20% decline in operating profit for the year 2001, while third-biggest luxury group Gucci had 17 percent lower earnings.
Adjusted for the three new brands, sales in the year to March 2002 dropped one percent.
Rupert said a number of Swiss operations would be merged to boost efficiencies, but not at the expense of brand independence and no layoffs were planned from its 4 800 staff in Switzerland. Richemont headquarters would move from Zug to Geneva.
Richemont raised dividend to 0,32 euros per unit from 0,30 euros.
Chairman Nikolaus Senn (75) will step down at the annual meeting in September, with Rupert becoming executive chairman.
FIRST INDICATIONS MIXED
Rupert said retail sales in April and May rose by four percent, but wholesale sales remained weak. Any recovery would depend on an improvement in economic conditions, he added.
Net attributable profit fell to 826-million euros in 2001/02 from 968-million, including contributions from 21,1% owned by British American Tobacco.
Sales for 2001/02 were up five percent, with watches up nine percent and pens up eight percent. Jewellery sales were down especially at Cartier, but also at Van Cleef and Arpels.
Retail sales slipped three percent, but wholesale sales were up 11%. On a regional basis, there was a 13% rise in Europe and a small one percent rise in Asia, but a six percent decline in the Americas.
Richemont took a bigger tumble in profit than rivals such as Gucci and LVMH as the decline came in a year during which it integrated the LMH watch brands it acquired in July 2000.
Shares in Richemont have outperformed the DJStoxx Retail Index by 29% this year while LVMH have outperformed by 25% and Gucci by 14%.
Compagnie Financiere Rupert controls Richemont with 50,45% of the votes and 9,1% of the capital.
The Rupert family owns Cie Financiere Rupert, including Anton Rupert (85) who started in cigarette-making in Johannesburg and from 1948 expanded holding firm Rembrandt into South Africa’s biggest conglomerate.
Richemont was created as an off-shore base for Rembrandt at a time that South African businesses in the world faced consumer protests over the government’s apartheid regime. – Reuters