Richemont’s Johann Rupert stubs out investor worries

JOHANN Rupert, chairman of Compagnie Financière Richemont, dismissed investor concern about the group’s performance, telling them at Friday’s results presentation that “either you trust us or you sell your shares”.

After a decline in operating profit, investors fear that the company is not adapting fast enough to consumer demand for bespoke technology products, such as watches.

Rupert, who smoked during the presentation, said: “I don’t want us to compete against Google . . . either you trust us or you sell your shares,” he said.

Rupert was responding to criticism about the luxury goods company’s slow evolution in meeting new consumer needs and responding to market shift.

Rupert maintained that the group would undergo change in the next 10 years.

“We are getting skill sets that can cope with that change.”

Bringing in younger blood includes the appointment of Rupert’s son Anton as a nonexecutive director.

“We are confident that we will deliver proper returns for our shareholders in the short to medium term,” said Rupert.

By the close on Friday, Richemont’s share price fell 5.09% after the group reported operating profit was down 14% to à1 764-million, while profit for the year was à1 210-million compared with à2 227-million the previous year.

Atiyyah Vawda, an analyst at Avoir Capital Markets, said the results were disappointing because they showed that there was more than expected inventory in the fourth quarter, which could have caused some weakness.

The results presentation revolved around Richemont’s change in strategy and how the group was adapting to a new market that demanded exciting new products, Vawda said.

Richemont had also bought back a substantial amount of stock from shops that was not selling, he said.

The weak demand for some items had prompted the company to discount some of its stock.

To address these challenges, Rupert appointed a new board that consisted of people with specialist skills in technology, China and restructuring, a move that Vawda said was an indication of the focus in these areas.

The changes Rupert was referring to included a greater role for online retailing. Richemont owns a nonvoting stake in online retailer Net-aPorter.

The Middle East and Africa had the second-biggest decline in sales in constant currency rates as negative currency movements and reduced tourist spending put a dent in sales.

For the world’s second-biggest luxury goods retailer, the region contributed a marginal 8% towards group sales at à885-million, a decline from the à975million in the matching period last year.

Deborah Aitken, a senior industry analyst at Londonbased Bloomberg Intelligence, said the region seemed to be on the back burner for the group.

“They can’t be given pure priority when you have such big regions” that are fundamental to the group and that need to adapt to the changing retail market.

Notable drivers of growth for the group were Asia-Pacific and the Americas, Aitken said.

Asia-Pacific delivered 37% and sales growth and the Americas 17% growth.

Aitken said Richemont was talking about new products, regeneration and accessible price points which boded well for its expansion into developing markets — primarily Asia-Pacific, and in the long term, Africa and the Middle East.

“If we look at Asia-Pacific, excluding Japan, it’s 30% of their sales and the Middle East and Africa is another 7%.”

We’re confident we will deliver proper returns in the short to medium term The real issue is: what do we think the brand can do in five years’ time

While some brands seem to be performing better than others, Rupert remained tight-lipped about the performances of individual brands.

He brushed off criticism, but did say: “We’ve clearly made some mistakes, but the real issue is: what do we think the brand can do in five years’ time.”