Record profit for Richemont Group for 2013/2014
World’s second largest luxury group, Richemont reports record profit of 2,07 billion euros for the full fiscal year 2013/2014, representing a 3 percent increase from the previous year. Sales increase by 5 percent to 10,6 billion euros.
Operating profit was nearly unchanged, at €2.4 billion, reflecting a 6 percent rise in expenses linked to planned investments in the retail and distribution network for a number of the group’s flagging brands.
Richemont’s revenue has been under pressure from weaker sales in China, one of the world’s largest markets for fine watches, jewelry and other luxury goods, amid a government crackdown on lavish gift-giving.
The Asia-Pacific region, dominated by China and Hong Kong, accounts for 40 percent of Richemont’s total revenue. But sales growth in the region was limited to 2 percent from a year earlier, despite double-digit increases in smaller markets like South Korea and Australia.
Sales jumped by 23 percent in Japan, which accounts for 8 percent of Richemont sales, bolstered by a flurry of demand late in the financial year before a rise in the Japanese national sales tax on April 1. But those gains were wiped out by a sharp decline in the yen over the period, leading to a 1 percent revenue decline in euro terms, to €892 million.
While fine jewelry and watch brands, including IWC Schaffhausen, Vacheron Constantin and Jaeger-LeCoultre, generate the bulk of Richemont’s sales, the company has recently expanded into e-commerce, where it hopes its fast-growing — but still unprofitable — luxury clothing website, Net-a-Porter will eventually help to offset the poor performance of smaller brands like the leather goods maker Lancel, the men’s wear label Alfred Dunhill and the French fashion house Chloé.
Richemont did not break out performance figures for Net-a-Porter, saying only that its results had “improved.” The company last year rejected speculation that it might sell Net-a-Porter after Italian news media reports that it had held talks with the fast-growing Italian online retailer Yoox about a possible merger.
The group said that its Montblanc pen division had gone through a particularly difficult year, with a sharp drop in Chinese demand dragging overall sales down 5 percent while operating profit plunged 64 percent to €43 million. The closing of numerous stores and a restructuring of that business led to a provision of €25 million.