At the end of last week, Bank of America Securities highlighted figures and comments from the luxury industry which tended to suggest that, except in China, sales in the sector were heading towards an acceleration in the second quarter.
It is precisely this question about China that caused the Swiss group Richemont to fall by more than 12% on the Zurich Stock Exchange. The action of the owner of Cartier also accuses, by far, the largest drop in the Stoxx 600 index of major stocks listed in Europe. It is now losing a third of its value since the beginning of the year.
40% of the Chinese store network closed
On the occasion of the publication of its annual accounts, which are also below analysts’ expectations, the luxury group, also known for its brands IWC and Vacheron Constantin, explained that the confinements in China weighed on its performance, 40% of its local network of stores is currently closed, while tensions in supply chains and rising interest rates are hampering its growth prospects in the United States.
For President Johann Rupert, who founded Richemont in 1988, the second world economy could suffer more than expected: “ The rebound won’t be that quick, it won’t be a triple digit rebound “, according to comments relayed by the Bloomberg agency. ” Even though the worst of the Covid outbreak is hopefully behind us, we face a global environment that is the most unstable we have seen in several years.. China, where the luxury group has around 3,000 employees, could face a ” bis repetita of 2020 as Covid infections accelerate, Chief Executive Cyrille Vigneron said.
Impact of Russia and Yoox on accounts
Richemont has, moreover, and like most multinationals, announced the suspension of its activities in Russia, which had an impact of 168 million euros on its profits. For the year as a whole, the net profit has certainly increased by more than 60% in one year, to nearly 2.08 billion euros, but it is much lower than analysts’ expectations, which were aimed at a level of 2.75 billion. Operating profit also came in below expectations, at 3.39 billion, while turnover exceeded expectations, at 19.2 billion, up 44% at exchange rates. constants. In question, an increase in the costs of supply, distribution, but also of operation and communication.
Last thorn in the side of the Swiss: no concrete progress has been observed in the discussions for the sale of the online distributor Yoox Net-à-Porter (YNAP), a source of losses for the group. Richemont is in talks with Fartech, a British e-commerce platform for the global fashion industry, but also with other interlocutors, whose names are not mentioned. The environment makes negotiations more complicated. Fartech is no better off, having fallen nearly 75% on the London Stock Exchange since the start of the year. YNAP cost the Swiss luxury group nearly 540 million euros in profits for the company over the financial year.