Online sales boost luxury goods group Richemont’s earnings
Johann Rupert’s Richemont, the luxury goods group that was initially cautious about e-commerce, has seen online businesses YOOX Net-a-Porter (YNAP) and Watchfinder giving its earnings a handy boost.
The Swiss-based group, which owns, among others, the Cartier and Van Cleef & Arpels brands, said YNAP’s contribution was the main reason sales were up 25% to €3.91bn for the third quarter to end-December.
The contribution of Richemont’s online operation offset a somewhat sluggish retail operation whose sales rose a modest 7% to €2bn. Sales for its wholesale operations only increased 1% to €1.1bn.
By comparison, online sales surged from €59m to €694m. Prior to the acquisition of YNAP, the group’s online sales contributed only 1% to total sales, but now make up close to 18%.
The success of its online retail operation has been a long time coming. Though Richemont had been looking to expand its e-commerce operations for a while, luxury brands have generally been cautions when it comes to selling online.
The Deloitte Global Powers of Luxury Goods 2018 report said for much of the past decade, these brands have “struck a sensible balance between exclusivity and accessibility, resulting in strong financial results”. This basically meant they were slow to grow sales online, as they feared they might become “too visible”.
A change in consumer behaviour, however, meant they had to take selling online a lot more seriously.
“As luxury consumers began spending more online, brands were left with no choice but to adapt to their customers’ new purchasing patterns.”
Richemont has been steadily building its online presence. It took a holding in e-commerce retailer Net-a-Porter in 2002 and then took full control in 2010.
In 2015, Richemont sold half of Net-a-Porter to Italian rival, YOOX, in a €1.3bn deal. Though Richemont owned half of the merged entity, it only had 25% of the voting rights, giving YOOX’s shareholders control of YNAP.
The group bought the holding in YNAP it didn’t yet own for €2.69bn in March 2018.
The boost from its online operations offset European retail difficulties. Unrest in France negatively impacted tourism and led to store closures for six consecutive Saturdays.
When measured by region, quarterly sales were up across all regions except the Middle East and Africa, and Europe. The group blamed unfavourable currency movements and a strong basis of comparison for a 13% decrease in sales in the Middle East and Africa.
In contrast, the group’s efforts in Asia Pacific paid off, resulting in a double-digit sales growth in China. Sales in Hong Kong, however, slowed mostly as a result of the strength of the Hong Kong dollar against the renminbi, which dampened tourist spend.
Besides investing in online retail, the group is also focusing a large part of its operations on the Chinese market. In 2018, it announced a partnership with Chinese e-commerce giant Alibaba.
Sales increased 7% in Japan and were up 9% in the Americas.