Richemont interim results hit by tourism effect

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Net profit for Swiss luxury goods group Richemont slipped 5% to ?404m ($396m) in the six month period ending September 30, compared to the same period in 2001, the group said today

Operating profit fell by 27% in the period to ?185m ($181m), a company statement said.

Sales at the world's second biggest luxury goods company fell 3% to ?1.78bn ($1.75bn), although excluding the adverse effect of exchange rate changes, sales increased by 1%. In the jewellery division, led by the Cartier and Van Cleef and Arpels brands, sales grew by 1%, but watch sales declined by 3%, leathergoods by 9% and fashionwear/other goods by 4%. Richemont said sales of steel and steel and gold watches performed better than precious metal and jewellery watches. Menswear benefited from good sales in the seasonal collections of Dunhill and Hackett. Declines within the fragrance, eyewear and "other" categories in particular were attributable to the downturn in travel-related business.

In Europe, sales dropped 4% because of depressed market conditions and falling tourism, and in Asia they dropped by 3% although Japan saw a 5% growth in sales. Strong performances by Cartier and Montblanc in the Americas helped drive a 10% increase in sales in dollar terms, or 2% measured in euros.

Operating expenses rose by 3% which the group said was a consequence of further expansion of the retail network together with building distribution and after-sales service centres for Jaeger-LeCoultre, IWC and A Lange & Sohne in various territories. The percentage of company-owned retail sales continued to grow, relative to wholesale sales, reaching 39.9% of total. As of September 30 the group owned and operated 540 stores worldwide with a further 344 operated by external partners.

Richemont executive chairman Johann Rupert said the results for the first six months of the financial year were in line with expectations. "The slowdown in sales, in particular in Europe, combined with the strengthening of the euro against both the dollar and the yen has contributed to the fall in operating profit for the period," he said.

Rupert added that he viewed the outlook for the rest of the financial year with "utmost caution."

"We live in a period of chronic uncertainty in terms of global events," he said, adding he expected operating profit for the full year to fall less than the rate for the first six months. But Rupert said this depended on there being no further deterioration in market sentiment from events "outside our control."