Richemont's jewels don't even know what a crisis is Over the last six months, the group has recorded growth of 16 per cent

Perhaps luxury ready-to-wear is in crisis because customers are questioning the value of overpriced sweaters and loafers, but nobody questions the value of jewellery. And nobody knows jewellery better than Richemont, and it shows. In its half-year results, the Swiss group reported excellent figures for the semester ending last 30 September, standing in stark contrast to the more disappointing results of many other luxury groups more focused on clothing and leather goods. The group posted revenue of €12.3 billion, up 16% at actual exchange rates and 17% at constant rates, with a second quarter that maintained a strong pace of 13%. That quarter, it should be noted, was the one that had caused the most difficulty for the other major luxury groups.

Jewellery and watches dominate the market

The lion's share of these earnings comes, of course, from jewellery and watches. Richemont owns Buccellati, Cartier, Van Cleef & Arpels and Vhernier, holding what amounts to a near-monopoly on high-end jewellery. This group of brands saw a sales increase of 19% at constant rates and 18% at actual rates, reaching €9.1 billion. The operating result for this segment rose to €3.2 billion, with a margin of 35.3%, or 33.4% excluding non-recurring items. 

As for watches — particularly Vacheron Constantin, Jaeger-LeCoultre and A. Lange & Söhne — sales amounted to €1.7 billion, up 10% at constant rates and 9% at actual rates, with an acceleration to 12% in the second quarter. Operating profit rose to €150 million from €50 million the previous year, bringing the margin to 8.8%.  Worth noting is that this segment specifically is considered to be in recovery, given that Swiss watchmaking had been facing some difficulties in recent times.

Fashion was less strong but still up 9%. The three star brands of the division were Alaïa, Montblanc and Peter Millar, though with a loss of €12 million — pocket change for Richemont, to the extent that the official document describes this loss as essentially stable. A configuration that, given the difficulties experienced even by Hermès during the same period, seems to point to, if not the future, at least the trajectory of the coming months in the sector. But where did this growth actually occur?

East and West

Geographically, growth was concentrated in the usual areas. Japan is the strongest market with a rise of 30% at constant rates, followed by the Americas at 23% and Asia Pacific at 16%. The latter is a significant figure as it also encompasses China, demonstrating that a slowdown in consumer spending has also affected jewellery to some degree. Europe advanced 13%, while the Middle East and Africa recorded a 2% decline for the obvious geopolitical reasons. The retail channel, which accounts for 72% of revenue, grew by 20%, while online sales rose by 17%. The share of direct-to-customer sales climbed to 78%. 

Overall, operating profit came in at €3.1 billion, up 33%, or 38% at constant rates. From this figure, however, €229 million must be deducted, derived from the recovery of customs duties the group had already paid. The effective profit is therefore approximately €2.9 billion. The operating margin reached 25.5%, an improvement of 330 basis points. Gross margins also rose by 120 basis points, thanks to a successful strategy of raising prices to offset the increase in raw material costs, and also to the fact that operating expenses grew more slowly than sales.

Net profit for the period (i.e. the earnings available to the company to reinvest or distribute to shareholders) rose 39% to €2.5 billion, while the net cash position consolidated at €7.7 billion, supported by an operating cash flow of €2.5 billion and the receipt of €0.4 billion from the disposal of Richemont's stake in Avolta (the company behind Dufry) at mid-year, net of the increased dividend payment. In short, it is a very good day to be a Richemont investor.