The market environment for luxury goods manufacturers has brightened over the past twelve months, from which the Geneva-based group Richemont also profited in the 2017/18 financial year. Although repurchases from the warehouses of watch dealers worldwide could cloud the development a bit. Overall, however, local currency analysts still expect at least a high single-digit percentage growth.
It is unclear to what extent the stock repurchases impair the operating result. This has also led to a relatively wide range of analyst estimates. Despite the burden, however, the operating margin is likely to make huge strides towards the 20 percent mark. The basis for this is the highly profitable jewelry business and the increase in profitability in the watch business.
Analysts are also hoping for answers to the question of whether the group-owned and recently refurbished leather brand Lancel is now being sold. In March, the Italian Piquadro group had registered their interest. Questions also arouse among analysts the surprisingly abrupt departure of Chief Technology Officer Jean-Jacques Van Oosten and the potential impact on the Group’s e-commerce strategy.
OBJECTIVES: Richemont has traditionally failed to announce concrete goals, and in the middle of January, when third-quarter sales were published, management did not comment on the outlook. At the end of December, the group was in a net cash position of 5.1 billion euros, which led to speculation about a new share buyback.
PRO MEMORIA: Italian online retailer Yoox Net-a-Porter (YNAP), in which Richemont now holds a 95 percent stake, reports a 0.5 percent increase in net income for the first quarter of 2018 to 518 million euros. At constant exchange rates, ie in local currencies, the increase was even 7.9 percent. The number of orders increased to 2.4 million from 2.2 million. The average order value fell to 314 euros compared to 343 euros a year before. The number of active customers is Yoox Net-a-Porter at 3.2 million (previous year: 3.0 million).
At the end of the (voluntary) full takeover bid, Richemont held a stake of 94.99 percent in YNAP at the beginning of May. The required minimum acceptance value for the offer (90%) was thus fulfilled, it said. Richemont has already held a 49 percent stake in YNAP and has offered a price of EUR 38 per common share for the outstanding shares. The total value of the transaction thus amounts to around EUR 2.6 billion.
To finance the acquisition, Richemont had placed a bond worth 3.75 billion euros in mid-March. The bond was issued in three tranches maturing in 2026, 2030 and 2038.
At the beginning of May, Richemont’s Chief Technology Officer, Jean-Jacques Van Oosten, resigned. Van Oosten was thus only five months in office. In a brief message, Richemont stated “personal reasons” for the resignation. Van Oosten will continue his career outside the group, it said. Jean-Jacques Van Oosten had started the post of chief technology officer at Richemont as part of a reorganization at the beginning of the year. He was also part of the Senior Executive Committee, more or less the extended management.
According to media reports, management changes were also made to some Richemont brands. The manager of Jaeger-LeCoultre will be Catherine Rénier from 1 May. She moved from the jewelry brand Van Cleef & Arpels, where she was last responsible for the Asia-Pacific region, to the Jurassic watch manufacturer. She replaced interim CEO Geoffroy Lefebvre with Jaeger-LeCoultre, who in turn will take over the management of Baume & Mercier. The Baume & Mercier boss, Alain Zimmermann, is supposed to raise and run online sales for all watch brands from the beginning of June.
Swiss watch exports, most of which are attributable to the leading Swatch and Richemont groups, have performed well so far in the current year. In the month of March, the export volume rose by 4.8 percent to 1.67 billion Swiss francs compared to the same month last year. In the months of January and February, exports rose by almost 13 percent each. The result for the first quarter of 2018 is an increase of 10 percent to 5.0 billion. This is on a quarterly basis, the highest growth rate is the second quarter of 2012, wrote the Watch Association FH end of April.
Richemont itself had already increased sales in local currencies by 7 percent in the third quarter of 2017/18, ie in the months of October to December. Business was particularly strong in the Asia-Pacific region (+ 11%), while sales in Europe fell by 1% and sales in the Americas stagnated.
SHARE PRICE: So far, Richemont’s securities have benefited very well from the brightening luxury goods market on the stock exchange. They have risen by more than 10 percent since the beginning of the year, while they have fallen by around 4 percent in the lead index SMI.