by Silke Koltrowitz and Silvia Aloisi
ZURICH (Reuters) – The Swiss luxury group Richemont published a lower-than-expected annual profit on Friday and adopted a cautious tone to discuss the prospects for growth in the Chinese market, announcements sanctioned by a fall in its share price.
The world number two in the sector, which owns, among other things, Cartier and the luxury watch brand IWC, has also not reported any concrete progress in the ongoing discussions on its exit from the capital of the online distributor YOOX Net-a. -Porter (YNAP), which remains a hotbed of losses.
He explained that the lockdowns in China are currently weighing on his performance, with 40% of his local store network currently closed, while supply chain tensions and rising interest rates are weighing on his growth prospects in the United States.
On the Swiss stock market, the Richemont share lost 9.34% in the middle of the morning and dragged in its wake several other big names in luxury, including Hermès (-1.18%) and LVMH (-0.69%).
The president of the Swiss group, Johann Rupert, unlike the leaders of several of its competitors who are counting on a rapid rebound in China once the health restrictions are lifted, declared that the second world economy could suffer more than anticipated.
“Even if China comes out of lockdown, the rebound won’t be that fast, it won’t be a triple-digit rebound,” he said.
Harry Barnick, senior analyst at Third Bridge, believes the health restrictions are effectively holding back Richemont’s growth in a market that accounts for around a quarter of its revenue.
DISAPPOINTING BENEFITS
“With stores closed in key markets like Shanghai and customers reluctant to spend on luxury goods in other cities, the country that boosted luxury goods consumption in 2021 could weigh on Richemont’s overall outlook. in 2022,” he explains.
The Swiss group’s net profit increased by 61% in the 2021 financial year, which ended at the end of March, to 2.079 billion euros, a result lower than the Refinitiv consensus which gave it at 2.75 billion.
Annual turnover jumped 44% at constant exchange rates to 19.181 billion euros, exceeding the median estimate, which stood at 18.78 billion.
These results mark “the first significant disappointment in luxury earnings”, note analysts at Goldman Sachs.
Regarding online sales, Richemont said that discussions with interlocutors, whose number or identity he did not specify, were complex but that they should be concluded “in the near future”.
“We are in talks with a number of partners and the talks are progressing well,” said Johann Rupert.
In November, his group announced that it was discussing with the American Farfetch the sale of a minority stake in YNAP while trying to convince other investors to transform YNAP into a neutral platform without a controlling shareholder.
“The absence of an agreement with Farfetch will weigh like a sword of Damocles”, believe analysts at Vontobel.
(Report Silke Koltrowitz and Silvia Aloisi; French version Marc Angrand and Federica Mileo, editing by Kate Entringer)