Resilience of luxury consumers continues to lift Richemont’s profits

Richemont has grown its earnings despite of volatility in geopolitical volatility. Photo: Reuters

Richemont has grown its earnings despite of volatility in geopolitical volatility. Photo: Reuters

Published Jun 5, 2023


The global market for luxurious components, such as jewellery and designer apparel, has remained resilient to the worldwide economic tumult – characterised by high inflation and rising interest rates – and helped drive up volumes and profitability in Richemont.

Johann Rupert, the chairman of Richemont, said in the company’s annual report released on Friday, that Richemont had grown its earnings despite of volatility in geopolitical volatility. Uncertainty and disruption to supply chains has decimated production and volumes for other companies.

“The group has drawn on the strength of its Maisons and the resilience of luxury consumers in an environment characterised by geopolitical volatility, economic uncertainty and high inflation,” Rupert said.

Cartier, the flagship jeweller brand for Richemont, will this year unveil a new high end collection, its CEO, Cyrille Vigneron, said. This will further entrench its position on the market as it pursues to capitalise on growing appetite for top-end collections.

This is despite sentiment from Rupert that global “economic volatility and political uncertainty look set to remain features” of the current trading environment.

“The group will seek to maintain the necessary agility to manage fluctuating levels of demand. I am confident that our Maisons are well positioned to meet strong demand, notably driven by a significant resumption of Chinese travel,” he said.

During the year to the end of March, Richemont’s sales soared to €20 billion (R418bn), a 19% year-on-year increase. Significantly high sales were recorded for the final quarter of the period under review in the Asia Pacific region following the removal of travel and health restrictions in mainland China.

“All the business areas, distribution channels and regions posted growth during the year. This performance was led by retail, Japan and Europe, closely followed by the Americas,” the company said in its annual report released Friday.

Sales across its own operated stores outperformed the other distribution channels markedly. Contribution from the own managed stores rose to 68%, and combined with online sales accounted for almost three-quarters of overall group sales.

Cash flow generated from operating activities amounted to €4.5bn in the period under review compared to €4.6bn in the prior year.

The 3% reduction in cash flow “reflected increased operating profits from continuing operations”. According to the company, this had been “more than offset by higher investments” in working capital.

As a result of this stronger earnings base, pivoted on a strong cash flow generation and a solid net position of €6.5bn as at the end of March 2023, the board of Richemont has proposed to pay an ordinary dividend of CHF 2.50 per ‘A’ share, 11% up on the prior year.

The board also intends to pay a special dividend of CHF 1.00 per ‘A’ share subject to shareholders’ approval at its September 6 annual general meeting.

Richemont also surprised markets by its decision to award chief financial officer, Burkhart Grund, about R280 million in annual compensations. This was more than what Richemont paid to CEO, Jerome Lambert, in total compensation.

“During the period, the Group reached an agreement with Farfetch and Alabbar, which is subject to a number of conditions, including the receipt of certain anti-trust approvals, to sell a controlling interest in YNAP,” it said.