Still living it up Despite uncertainty regarding the global economy, and consumers increasingly coming under pressure, Richemont can still count on the wealthy to enjoy its luxuries.
luxury group Richemont, which is chaired by billionaire businessman Johann Rupert, was created in 1988 by the spin-off of the international assets owned by the Rembrandt Group Ltd of South Africa (today known as Remgro). Richemont, which is based in Switzerland, owns several of the world’s leading luxury brands, including Cartier, Vacheron Constantin, JaegerLeCoultre, IWC Schaffhausen, Van Cleef & Arpels, Piaget, Panerai, Dunhill and Montblanc.
It is the largest jewellery player worldwide and Richemont has proven its business acumen in terms of making the right decisions regarding its footprint and merchandising, successfully developing both the high-end jewellery segment and product lines across a wide price range.
In recent years growth has been achieved quite easily for the luxury goods sector, especially companies which had exposure in China and other emerging markets. However, concerns over lower commodity prices, a weak demand environment and the continued strength of the Swiss Franc have weighed on the group. Margins are directly impacted by raw material prices and currency fluctuations, which makes it very difficult to make predictions in the current environment, given the extreme volatility that we are experiencing.
In Richemont’s latest trading update for the quarter to end December, it saw sales of €2.9bn, reflecting a year-on-year decline of 4% at constant exchange rates, but an increase of 3% at actual rates. Jewellery sales accounted for nearly 55% of total sales, with watches contributing 28.2%. Asia Pacific remains the most important geographical area for the group, contributing 35.3% of sales, followed by Europe’s 29.7% and the Americas’ 19.6%. Jewellery continued to experience growth across most regions and product categories, which compensated for the weak demand of watches, the group said. Compared to the first six months of the current year, the slowdown in sales largely reflected weak trading in Europe, according to its trading statement.
Its net profit for the year will also benefit from an one-time accounting gain of €620m related to the merger of The NET-A-PORTER GROUP and YOOX Group, announced in October 2015. Richemont holds a non-controlling interest in the enlarged group.
Speaking in Geneva in November 2015, Rupert said Richemont expected the second half of the