Richemont first half profit jumps 21%

Richemont Group reported a 21% increase in first-half net profit as a strong performance from the luxury giant’s jewelry business helped it overcome weaker demand for its high-end watches.

The Geneva-based company said net profit for the six months to Sept. 30 rose to €1.1 billion ($1.2 billion), from €908 million a year earlier, although the figure missed analysts’ expectations of €1.23 billion.

The world’s second-largest luxury group said its sales rose to €5.82 billion from a restated €5.07 billion for the same period in 2014, missing analysts’ forecasts of €5.95 billion.

Sales of branded jewelry, through its Cartier and Van Cleef & Arpels brands, rose 18% during the period, more than double the rate for its watch business, which sells brands such as IWC, Piaget and Jaeger-LeCoultre. The 8% rise in sales at its watches business was only achieved because of favorable currency exchanges as Richemont said sales of its watches were lower in local currencies, particularly in the Asia-Pacific region.

Richemont Chairman Johann Rupert described the performance as “satisfactory” highlighting the decline in wholesale demand and the strong performance from the company’s jewelry business.

“Jewelry sales grew strongly, this product area now accounts for one third of group sales,” he said in a statement. Looking ahead, “jewelry continues to outperform the watch category,” Mr. Rupert added.

In the luxury industry overall jewelry has been growing faster than watches, as consumers increasingly favor branded jewelry pieces, which are backed by lavish advertising campaigns emphasizing their history and design.

“The strong potential of branded jewelry to keep stealing share from the unbranded segment is a long-term sustainable trend since, compared to other categories, the branded segment is just a small fraction, with less than one third of [the] total market,” said Ms. D’Arpizio.

Still Richemont faces some difficulties, and said it expected the next six months to be “challenging” particularly in its wholesale business.

In October, the first month the second half of its financial year, it said its sales decreased by 1% at actual exchange rates and were 6% down in constant currencies, which remove the effect of currency swings, as weak market conditions persisted in Asia-Pacific and the Americas.

Van Cleef Arpels Oiseaux Enchantes watches