Johannesburg - Cie. Financiere Richemont SA, the maker of Cartier jewellry and IWC watches, said a “subdued” environment increases the need for caution and countered speculation it will sell any of its 20 brands.
Richemont expects to get bigger returns by investing more in units such as Montblanc, chief financial officer Gary Saage said on a call with reporters.
Montblanc’s new head Jerome Lambert plans to make the maker of pens, watches and accessories a “more accessible” luxury brand.
The company’s decision to review its brands in May sparked speculation that it could break up its fashion and leather-goods unit. The only brand Richemont was considering strategic options for was Lancel, and the luxury-goods maker has decided to keep the leather-bag maker rather than sell it, Saage said today.
Currency swings will weigh on second-half earnings after operating profit dropped 0.7 percent to 1.37 billion euros ($1.8 billion) in the six months through September, the Geneva-based company said today in a statement. Analysts expected 1.4 billion euros, according to estimates compiled by Bloomberg.
“The subdued overall environment and in particular our continued investments for the long term call for increased caution,” Chairman Yves-Andre Istel said in the statement.
Asia-Pacific
Revenue in the Asia-Pacific region, the source of about 40 percent of Richemont’s sales last year, is rising more slowly as China cracks down on the use of watches and jewellry as bribes and illegitimate gifts. Growth in that market was 4 percent in the first half, excluding currency shifts.
Asia-Pacific revenue rose 5 percent on that basis in the past fiscal year and 46 percent in the prior 12 months.
Total first-half sales increased 4.3 percent to 5.32 billion euros.
“While sales may increase in the second half, profit growth may be limited as the company spends on investment,” said Rey Wium, an analyst at Renaissance Capital in Johannesburg.
The subdued outlook also means it’s not conducive to selling a unit such as Lancel, he said.
Johann Rupert, who is taking a one-year sabbatical from his position as chairman, has said the Geneva-based company should have been quicker to cull bad investments.
Richemont last month said it won’t sell online fashion retailer Net-a-Porter. - Bloomberg News