Cie. Financiere Richemont SA (CFR), the second-biggest luxury-goods company, reported sales that beat analysts’ estimates as Asian consumers bought more Vacheron Constantin timepieces and Cartier jewelry.
Revenue rose 29 percent in the five months through August from the year-earlier period, the Geneva-based company said today in a statement. That beat the 18 percent average estimate of 15 analysts surveyed by Bloomberg. While operating profit this year will be “significantly higher,” net income will be “broadly in line” with last year’s level, Richemont said.
Sales rose 46 percent in the Asia Pacific region, where growing numbers of millionaires are fueling demand for high-end goods. Wealthy Chinese consumers own about four luxury watches on average and Cartier is their most preferred jewelry brand, according to the Hurun Wealth Report. Richemont said it sees no signs that demand in China is weakening.
“The company is probably opening more stores in Asia Pacific than anticipated and they’re not saying they see signs of a slowdown, which is positive,” Jon Cox, an analyst at Kepler Capital Markets in Zurich, said in a phone interview.
Richemont rose 3.18 francs, or 7.3 percent, to 47.05 francs in Zurich trading today, extending yesterday’s 4.5 percent gain.
While Richemont faces “the future with cautious optimism”, the company said the remainder of the year is “difficult to predict.”
“The problems of fiscal deficits generally and euro zone difficulties in particular are likely to act as a drag on business prospects for companies in the period ahead, especially if growth markets are affected,” Chief Executive Officer Johann Rupert said in the statement.
Yesterday’s decision by the Swiss National Bank to cap the franc’s rate against the euro was a “very brave move”, Rupert said after the company’s annual shareholder meeting in Geneva.
“It’s exemplary; I just hope it doesn’t cost too much,” the CEO said. “When you have a situation where people seek safety, the Swiss franc is a natural harbor.”
The bank said it won’t tolerate an exchange rate below 1.20 francs per euro. The Swiss currency dropped more than 8 percent against the euro yesterday. Rupert declined to comment on the 1.20 franc level.
Net income in the current financial year will be affected by the strong franc, which will lead to a “translation” loss on Richemont’s cash balance, the company said. Net cash was 2.6 billion euros at the end of August. Full-year profit also will be hurt because the previous period included a 101 million-euro ($142 million) accounting gain stemming from the purchase of online fashion retailer Net-A-Porter, Richemont said.
Excluding currency shifts, Richemont’s sales increased 35 percent. The company, which reports earnings in euros, doesn’t release profit growth for the first five months of the year.
PPR SA, the French owner of the Gucci brand, and LVMH Moet Hennessy Louis Vuitton SA (MC) predicted in July that sustained demand for luxury products this year.
Revenue in Richemont’s watch division climbed 28 percent, above analyst estimates of a 21 percent gain. The maker of Jaeger-LeCoultre timepieces got about a quarter of sales in the 12 months through March from specialist watchmakers.
Revenue from Richemont’s jewelry unit increased 34 percent, double the 17 percent average estimate. The division generates about half the company’s sales. Richemont also gets revenue from businesses including Net-a-Porter and Alfred Dunhill, the London-based maker of leather goods, fashion and lighters.
Richemont prefers to invest in its existing businesses, Rupert said when asked about the company’s interest in making more acquisitions.
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