Despite downturn, Richemont shows growth

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Despite downturn, Richemont shows growth

May 14, 2009

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Geneva--Swiss luxury goods group Richemont saw sales increase 2 percent to approximately $7.36 billion for the year ended March 31, 2009, with 10 percent growth during the first six months of the year offset by a 5 percent sales decline during the second half due to the worldwide economic slowdown, the company announced on Thursday.

Richemont's Jewellery Maisons sector, which includes Cartier and Van Cleef and Arpels, experienced a 4 percent increase in sales to about $3.76 billion for the year.

According to the company, despite a difficult trading environment, Cartier reported another record year in sales and profitability, with strength in high-end jewelry sales made exclusively through Cartier's own boutique network of 172 stores, as well as in high-end watches and Ballon bleu.

Van Cleef and Arpels reported good sales growth, albeit from a significantly lower base.

Meanwhile, the company's Specialist Watchmakers sector, which includes A. Lange and Sohne, Baume and Mercier, IWC, Jaeger-LeCoultre, Officine Panerai, Piaget, Ralph Lauren Watches, Roger Dubuis and Vacheron Constantin, saw sales increase 4 percent to about $1.96 billion for the year.

According to Richemont, sales at IWC, Jaeger Le-Coultre and Vacheron Constantin were particularly strong, and all the long-held Maisons were profitable. The company did, however, incur specific charges related to the acquisition of the Roger Dubuis business, which partly accounted for the reduction in profitability for the business area as a whole. In January 2009, the joint venture with Polo Ralph Lauren premiered its product range, but this had no impact on sales during the year.

From a regional standpoint, sales in European markets increased 3 percent, which reflects a modest increase in established markets and double-digit sales growth in certain developing markets in the region, such as the Middle East.

Sales growth in the Asia-Pacific region remained buoyant, according to the company, although the rate of growth slowed during the course of the year. The strategic importance to the company of the Chinese market was underlined by the continued expansion of Richemont's distribution network there. Sales in the region now represent 27 percent of total sales.

The Americas region reported a 12 percent sales decrease for the year: The modest sales decrease in the first six months was followed by a very significant slowdown during the second half of the year as the economic difficulties there impacted consumer confidence and purchasing power. Sales in the Americas represent 16 percent of total sales.

The Japanese market remained challenging throughout the year, with sales in local currency terms 12 percent lower than the prior year, Richemont said. The significant strengthening of the yen relative to the euro during the year largely offset this decrease in euro terms. Sales in Japan represent 13 percent of total Richemont sales.

The company also announced that Norbert Platt has indicated his intention to retire at the end of the year after five years as Richemont's chief executive officer.

Looking ahead, Richemont said sales in the first month of its new financial year were 19 percent lower compared with April 2008, a significant decrease that was unexpected. Still, the company said it has prepared for the downturn and has the resources available to support its Maisons, colleagues and clientele.

"There are currently very few encouraging signs in the global economic picture. Given these conditions, we cannot predict when an overall improvement in trading will come about," Richemont Executive Chairman Johann Rupert said in a media release. "Having prepared for the downturn...we will emerge from these economic headwinds in a much stronger competitive position--however long it may take."

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