Operating margin over 15% at Richemont 1H
Richemont announces its unaudited consolidated results for the six month period ended 30 September 2019. Its key Financial highlights are, 1: Sales increased by 9% at actual exchange rates to € 7 397 million and by 6% at constant exchange rates, 2: Growth in all regions, distribution channels and business areas at actual exchange rates, led by the Jewellery Maisons and Online Distributors.
3: Double digit sales progression at actual exchange rates in China, Korea, Japan, the US and the United Kingdom, outperforming other locations; a difficult environment in Hong Kong SAR, China, 4: At actual exchange rates, high-single digit growth in the Group’s directly operated boutiques, led by the Jewellery Maisons, and double digit growth in online sales across all Maisons and businesses.
5: Operating profit up € 35 million to € 1 165 million led to a 15.7% operating margin, 6: Profit for the period of € 869 million, broadly stable when excluding the prior year period’s post-tax non-cash gain of € 1 378 million on the revaluation of the Yoox Net-A-Porter Group shares held prior to buy-out, 7: Net cash position of € 1 770 million following the acquisition of Buccellati.
Looking at the Sales details, in the six month period, sales increased by 9% at actual exchange rates and by 6% at constant exchange rates. On a fully comparable half year base for Online Distributors, sales grew by 6% at actual exchange rates. Excluding Online Distributors, sales rose by 5% and by 2% at actual and constant exchange rates, respectively.
At actual exchange rates, sales were higher across all regions, distribution channels and business areas. Sales registered double digit progression in Japan and the Americas, and high-single digit growth in Europe and Asia Pacific. China, Korea, Japan, the US and the United Kingdom significantly outperformed other locations.
Led by the Jewellery Maisons, the Group’s directly operated boutiques posted high-single digit growth. Wholesale sales were 2% higher than the prior year period, reflecting ongoing optimisation of external points of sales and continued rightsizing of inventories to end-client demand. Online sales grew strongly across all business areas. By business area, sales growth was driven by Jewellery Maisons and Online Distributors.
Further details on sales by region, distribution channel and business area are given under Review of Operations.
Gross profit increased by 8% to € 4 610 million and gross margin moderated to 62.3% of sales, due to the dilutive impact of the full six month consolidation of Yoox Net-A-Porter Group and Watchfinder & Co.
Excluding Online Distributors, gross margin expanded from 66.6% to 67.6%, with this 100 basis point improvement mainly driven by positive product mix effects. Currency effects were overall broadly neutral, with the positive effect of a stronger US dollar and Japanese yen on sales offset by the impact of a stronger Swiss franc on costs.
Operating profit increased by 3% to € 1 165 million, reflecting higher sales and gross profit partly offset by controlled increases in costs as detailed below. Operating margin was 15.7% compared to 16.6% a year ago. Excluding Online Distributors, operating margin increased to 21.8% from 21.1% in the prior year period.
Total operating expenses across the Group grew by 10%, and by 6% excluding Online Distributors. Selling and distribution expenses rose by 6%, mainly due to higher depreciation linked to continuing upgrades to distribution networks and further enhancement of retail and marketing capabilities. Selling and distribution expenses decreased from 24.0% to 23.4% of sales, partly reflecting the adoption of IFRS 16 Leases.
Communication expenses represented 9.2% of sales and increased by 20%, largely explained by planned initiatives at the Jewellery Maisons, Specialist Watchmakers and Online Distributors as well the full six month period effect for Online Distributors. Fulfilment expenses rose by 78% to € 162 million, primarily driven by an acceleration of online retail and the above mentioned full six month period effect.
The 15% growth in administration costs resulted mainly from expenditure in IT and digital initiatives and the aforementioned period effect. Other operating expenses included the previously mentioned acquisition-related charges as well as the amortisation of intangible assets recognised on acquisitions at the Online Distributors.
