Richemont lifts dividend as online platforms boost sales
Luxury goods group aims to accelerate its e-retail presence in China in a bid to drive growth in that country
The Rupert family-controlled Richemont, which owns the Cartier and Van Cleef & Arpels brands, aims to accelerate its online presence in China in a bid to drive growth in that country.
The Swiss-based luxury goods group plans to move into online retail in China, following its investment in luxury and fashion retailer e-commerce sites Yoox Net-a-Porter (YNAP) and pre-owned watch platform Watchfinder.
These acquisitions were the main reasons overall sales rose 27% to €14bn for the year to end-March.
Its takeover of YNAP in March 2018 led to it creating its online operations, which now account for 16% of total group sales.
In October 2018, the group announced plans to establish a joint venture with Chinese e-commerce giant Alibaba to extend the in-season offerings of YNAP to Chinese consumers. Richemont chair Johann Rupert said discussions with Alibaba are progressing.
Richemont CFO Burkhart Grund said the partnership with Alibaba and other companies in China is a priority, as the online luxury-goods market in that country is still relatively small.
The importance of China to Richemont and the luxury goods market in general can be seen in its Asia Pacific operations accounting for €5.24bn, or 38%, of total sales for the year. This is up from the €4.32bn it made in the corresponding previous period.
The 2018 Bain Luxury Study noted that China was a major growth driver for the luxury sector in 2018.
“Chinese consumers led the positive growth trend around the world. Their share of global luxury spending continued to rise (now 33% of the total, up from 32% in 2017),” the study reads.
Bain expects demand for luxury goods in China to remain strong.
“Looking ahead, this positive growth trend is expected to continue in the range of 3%-5% per year through 2025 to reach €320bn-365bn [a year],” it said.
Profit for the year rose to €2.8bn, including a post-tax noncash gain of €1.4bn on a revaluation of its YNAP shares.
YNAP’s sales rose “at a double-digit rate”. Excluding YNAP and Watchfinder, group sales grew 8%.
Operating profit rose 5% to €1.9bn, falling slightly short of analyst expectations. Even so, the board proposed a dividend of Sf2 ($1.98) per share, from Sf1.90 the previous year.
“Most of our markets were in positive territory, led by double-digit increases in the US and in all the main markets of Asia Pacific,” Rupert said.
Shares in Richemont closed up 4.67% to R104.40, its largest rise in a month.
Richemont went into e-retail in 2002, when it took a holding in e-commerce retailer Net-a-Porter. It took full control in 2010.
The group sold half of Net-a-Porter to Italian rival YOOX in a €1.3bn deal in 2015, and its name was changed to YOOX Net-a-Porter or YNAP.
Richemont bought out the holding in YNAP it did not yet own for €2.69bn in March 2018.
Though YNAP produced strong results, Grund said the group is still in the process of merging its operations with the e-commerce platform.
“From an accounting perspective, we took control on May 9. It was only delisted in June. So basically, we only sat down with our new colleagues in July.”
Grund said since then there has been an intense exchange of ideas between Richemont and YNAP management that led to them looking for what he called “quick wins”, such as getting its Cartier brand to trade through the YNAP site.
Correction: May 20 2019
An earlier version of this article incorrectly reported Richemont's shares to have closed at R10.44. The share price was at R104.40.