Sales and profits dive at Richemont but business starts to bounce back

By

Sandra Halliday

Published
Nov 6, 2020

The big news around Richemont this week may have been its major investment in Farfetch, but on Friday it also made headlines with its own half-year results.

The owner of Net-A-Porter, Chloé and Cartier said that sales for the March to September period fell 26% to €5.478 billion. That was a 25% fall at constant exchange rates.

Group operating profit was down 61% to €452 million with an 8.3% operating margin, and net profit for the period was down 82% to €159 million

Q1 revenue had fallen 47% but, like other luxury companies, it saw a strong bounce-back in the second quarter. Sales from July to September fell only 5% at actual exchange rates and a smaller 2% at constant exchange rates.

For the half, sales in the group’s directly operated boutiques and wholesale channels declined at double-digit rates compared to the prior year period. But sales in China were up by 78% during the period and helped to rescue the Asia-Pacific region as a whole. Meanwhile Europe, the Americas and Japan were down in double-digits.

Europe recorded the highest rate of decline alongside Japan, with sales down 44%. All markets and business areas were dented by temporary store and fulfilment centre closures, a halt in international tourism and muted local demand. France, Italy, Switzerland and the UK were particularly affected by a lower level of tourist activity, as were the Jewellery Maisons, Specialist Watchmakers and Fashion & Accessories Maisons. 

The contribution of Europe to group sales was reduced to 22% from 30%, but it remains the group’s second largest region in terms of sales.

The Americas region posted a 31% reduction in sales, with all business areas “significantly impacted” in Q1. All channels saw lower sales, including online retail sales, which decreased by a low-single-digit rate overall. But despite the volatile environment, trading improved steadily and turned positive in September while Q2 was marked by positive retail sales and strong online retail sales for the Jewellery Maisons.

The Online Distributors division (comprising Yoox, Net-A-Porter, Outnet, Mr Porter and Watchfinder) weren’t as strong as they might have been in H1. They were initially impacted by temporary fulfilment centre closures, but overall, they showed the most resilient performance. The Online Distributors segment’s H1 sales fell 21% to €934 million. But compared to retail and wholesale sales which contracted at significant double-digit rates, total group online retail sales (that is, including sales for its individual brands) fared better, with only a 4% decline.

In fact, it saw triple-digit growth in e-commerce sales at some of its brands. Overall, online retail including Online Distributors increased its contribution to 22% of group sales from 17% in the prior year period. And when excluding the aforementioned Online Distributors, the group’s online retail sales percentage increased significantly, to make up 7% of total sales, from 2% in the prior year period.  This is still a small figure but is clearly improving fast.

Meanwhile the company said that it’s Jewellery Maisons such as Cartier and Van Cleef & Arpels “showed strong resilience with sales in the second quarter growing by 4% at actual exchange rates and 7% at constant exchange rates, leading to an operating margin of 30.1% for the half year”.

But Specialist Watchmakers saw a “more pronounced decline in sales” that reflected their greater reliance on multibrand retail partners. They generated a small loss but remained cash flow positive. 

Its Other segment that includes labels like Montblanc, Chloé, Dunhill and Alaïa saw sales falling 42% to €545 million.

Chairman Johann Rupert said: “A strong presence in China and an acceleration in digital initiatives have partially mitigated the consequences of temporary store closures and a halt in tourism worldwide. Our Maisons were swift to build on past investments in digital infrastructure and maintain direct engagement with clients, contributing to our Maisons’ resilience. Our efforts to improve the quality of our distribution networks and inventories at our multibrand retail partners also helped lessen some of the negative impacts of the pandemic.”

As mentioned, online sales declined, but Rupert added that “although the pandemic has hampered sentiment and demand around the world, we have continued to make good headway on key digital initiatives and further advance on our journey towards New Retail. 

“Net-A-Porter’s platform migration is progressing steadily and YNAP began operating the e-commerce activities of Montblanc in August and Cartier in the UK in October. Watchfinder has further strengthened its international footprint”.

And its joint venture with Alibaba, Feng Mao, has “continued to develop favourably”. Eight Maisons (Dunhill, Chloé, Montblanc, IWC Schaffhausen, Jaeger-LeCoultre, Panerai, Piaget and Vacheron Constantin) opened flagship stores on Tmall Luxury Pavilion in the period. “Early results of these Pavilion flagship stores are promising, and our teams are working closely with Alibaba to target their vast client base and extend our reach to the lower tier cities in China,” Rupert said.