May 20, 2022
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Richemont strong as fashion ops improve, but delayed YNAP deal dents share price

May 20, 2022

Richemont delivered its full-year results on Friday and said the period to 31 March saw a “strong performance”, with a “significant step change in group sales and operating profit”. In fact, those metrics reached €19.181 billion and €3.39 billion respectively.

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That meant sales were up by 46% at actual exchange rates and 44% at constant exchange rates (CER), with double-digit increases across all business areas, regions and channels. As with many of its luxury peers this results season, growth momentum was led by retail and the Americas.

And that operating profit figure represented a more-than-doubling of its earnings, aided by an improved operating margin of 17.7%.

The performance was driven by its Jewellery Maisons with 49% sales growth (or 47% CER) and an impressive  34.3% operating margin. Its Specialist Watchmakers grew by 53% (or 50% CER) and achieved a 17.3% operating margin.

Meanwhile, Online Distributors (the company owns Yoox Net-A-Porter) saw growth of 27% (or 26% CER) with YNAP’s standalone EBITDA “at breakeven before [an] exceptional reward payment”.

Its ‘Other’ business area also saw strong growth with a 53% sales rise (or 51% CER) and a “significantly reduced operating loss”.

Despite the suspension of commercial activities in Russia resulting in a €168 million negative operating result impact, its net profit for the year rose by 61% to € 2.079 billion.

And in case we make the mistake of thinking that the performance was only good because it was compared with a heavily-pandemic-hit year, the company said that compared to the 12 months to 31 March 2020, it also did well.

On that basis, sales were up by 35% at actual exchange rates and 37% CER. It saw broad-based growth in terms of business areas led by retail and online retail, and a significant 700 basis point improvement in its operating contribution.


The group said that in the latest year, increased inflationary pressures and repeated temporary store closures due to health protection measures were offset by relatively improved economies up until February.

Its annual sales figure was an all-time high and — as mentioned — the Americas region was key here with a 79% increase. Sales in Asia Pacific rose by 32%, with mainland China sales growing 20%. And in Europe, “the strong European client base more than offset subdued inbound tourism, leading to a 51% sales increase”. Meanwhile in the Middle East and Africa, “sales grew at a similar pace, surpassing Japan as the group's fourth largest market”, where sales rose, albeit by ’only’ 28%.


It added that wholesale recovered from last year, and that direct-to-client sales rose by double-digits compared to both the prior year and on a two-year basis. This was “further enhanced by the return to in-person high-jewellery events and the long-awaited Watches and Wonders event, which opened its physical doors in Geneva for the first time in three years”.

As we said earlier luxury jewellery and watches were all in high demand. But it’s important that the firm’s online and fashion brands were also stronger.

For its online unit, it said the shift towards a hybrid business model with a mix of inventory ownership and e-concessions/marketplace at Net-A-Porter and Yoox, as well as localisation efforts, progressed further. And Britain’s Watchfinder consolidated its position as a leader in pre-owned watches in its home market and outside the UK.

The fashion and accessories brands it owns did better too. The 53% sales growth was positively impacted by newly appointed creative directors at Alaïa, Chloé and Montblanc, as well as by the contribution of Delvaux, the Belgian luxury leather goods Maison, acquired last June”. 

Peter Millar continued to perform strongly, notably through its G/Fore brand, while Alaïa and Chloé “enjoyed a good reception of their recent collections”. Montblanc's leather collection was “successfully launched” this March, but lacklustre travel retail continued to weigh on the Maison’s performance. Overall, the business area’s operating loss was slashed to just €47 million from €218 million.

Tantalisingly, the company also said that "discussion with our Luxury New Retail (‘LNR’) partners continues around closer future collaboration. There is considerable complexity, which means the process is inevitably protracted. We look forward to concluding matters in the near future”. That was what drove the share price lower as investors showed their impatience at the long-drawn-out process to sell a stake in loss-making YNAP to luxury e-tail peer Farfetch.

But while the talks are dragging on, Richemont's chairman Johann Rupert said the negotiations were going well.

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