Richemont Group full year profit down by 35%
Richemont Group reported an expected 36% drop in annual profit that was driven by previously announced losses on financial instruments, as the luxury giant struggled with volatile exchange rates and slumping sales in key markets.
Geneva-based Richemont reported that earnings for the year to March 31 fell to EUR1.33 billion ($1.48 billion) from EUR2.07 billion a year earlier. Analysts had forecast EUR1.35 billion.
Sales for the company, which also owns the Cartier, Piaget, IWC and Montlanc brands, rose 4% to EUR10.14 billion, below analyst forecasts of EUR11.17 billion.
Richemont, like many luxury companies, has been buffeted by volatile currency markets over the past year. In April, Richemont warned its full-year earnings would drop by more than a third after financial instruments it had bought to deal with currency fluctuations fell sharply.
Exchange rate volatility is challenging for Richemont because the company keeps its books in euros, a currency that has fallen sharply. Much of its costs, however, are denominated in Swiss francs, which have soared since Switzerland’s central bank ended a policy of capping the currency’s value in January.
Richemont said the end of the cap resulted in a loss of EUR686 million, primarily caused by losses on financial investments and the falling value of foreign exchange contracts.
Volatile exchange rates have caused other headaches for Richemont, as well as the broader luxury industry, by creating the opportunity for a gray market to flourish in Asia, where many sellers buy products in Europe to exploit price differences.
Richemont said sales in Asia, excluding Japan, fell 1% during the year as Hong Kong and Macau remained difficult. Europe improved by 6% and the Americas increased 13%.
For April, the first month of its new financial year, Richemont said sales had increased by 9%.