Richemont shares surge on firm sales and positive company sentiment

POSITIVE sentiment of robust recovery in global luxury goods sales, such as jewellery, buoyed Richemont to a 12.8% share surge on the JSE.

This was after the company reported strong September interim sales volumes and chairperson Johann Rupert said the company was well geared to overcome global economic uncertainties.

The company on Friday lifted sales and operating profit from continuing operations to €9.7 billion (R173bn) and €2.7bn, respectively.

Shares in the company on the JSE responded positively to this, surging by 12.8% to close Friday’s trade session at R214.30.

Market analyst Paul Hawkins said Richemont’s stronger sales provided “further evidence that luxury is a good place to hang out, even in a recession” market.

Rupert said although the global economy was poised for volatility, the company had brighter prospects.

It also reported a 40% increase in interim profits from continuing operations for the period to end September to €2.1bn.

However, there was a €2.9bn loss from discontinued operations emanating from a €2.7bn non-cash writedown of online fashion company, Ynap net assets.

An agreement was reached with Farfetch and Alabbar for the disposal of Richemont’s controlling interest in Ynap during the half year period under review.

Despite this, Richemont had a strong net cash position of €4.8bn, with €1.5bn of this cash flow “generated from operating activities, targeted inventory build-up and increased dividend”.

There was “improved momentum in Asia Pacific with sales up 3%” as well as “double-digit increases” in its other regions.

The company’s sales growth momentum was spearheaded by retail, which was up 30% “at actual exchange rates and 21% at constant exchange rates,” representing 67% of overall group sales.

The Jewellery Maisons unit achieved 24% sales growth and delivered a 37.1% operating margin while Specialist Watchmakers expanded sales by 22%.

Richemont’s other business segments dominated by F&A Maisons had growth of 27% and 4.3% in operating margins.

Although he was upbeat about the company’s prospects and its stronger sales and financial performance, Rupert is taking a cautious outlook for the company.

He commented that the global geopolitical outlook remains uncertain and stressed that there was likely to be volatility in global markets as central banks tighten monetary policy further.

“It is highly uncertain how the political, economic and social landscapes will evolve in Europe and in our other key markets,” said Rupert.