Cie. Financiere Richemont SA, the world’s largest jewelry maker, reported higher first-half profit than analysts anticipated as Asian and American consumers bought more Cartier necklaces and Vacheron Constantin watches.
Net income rose to 646 million euros ($879 million) in the six months ended Sept. 30 from 344 million euros in the year-earlier period, the Geneva-based company said on its website today. That beat the 517 million-euro average estimate of 11 analysts surveyed by Bloomberg.
Richemont sales rose 50 percent in the Asia-Pacific region, the company’s second-biggest market. China and Hong Kong imported 2.92 billion Swiss francs ($3 billion) of Swiss timepieces in the first nine months of 2010, a quarter of the country’s exports. Wealthy Chinese consumers own 4.4 luxury watches on average and Cartier is the most preferred jewelry brand, according to the Hurun Wealth Report.
“It’s an excellent set of figures, driven by core watch and jewelry divisions in Americas and Asia Pacific,” said Jon Cox, an analyst at Kepler Capital Markets. “I would expect a serious upward move in consensus estimates.”
Revenue advanced 36 percent in October, the first month of Richemont’s second half, slower than the 37 percent growth in the first half. Richemont repeated it expects a tougher second half as comparisons with the year-earlier period become more difficult and the strength of the Swiss franc increases costs. Comparisons will be more difficult from November, when a sales recovery started, Chief Financial Officer Gary Saage said on a call with journalists.
“Estimates have to be increased, but despite the strong October figure, there will be a slowdown in growth in the second half,” said Rene Weber, an analyst at Bank Vontobel, who cut his recommendation on the stock today to “hold” from “buy” because the stock has hit record highs.
The shares rose 0.3 percent to 51.55 francs as of 9:51 a.m. in Zurich. The stock has gained 48 percent this year, about the same advance as in LVMH Moet Hennessy Louis Vuitton SA, whose shares were down 2.3 percent in Paris today.
Operating profit almost doubled to 760 million euros and the operating margin rose to 23.3 percent from 16.4 percent. Richemont said first-half profit was boosted by 102 million euros for an accounting gain relating to the revaluation of the company’s previous stake in Net-a-Porter.com following Richemont’s acquisition of an additional holding.
The company won’t comment on “market speculation” about its relationship with Hermes International SCA, the French leather goods maker of which LVMH holds a 17.1 percent stake, Alan Grieve, director of corporate affairs at Richemont, said.
Hermes, which wants to remain independent, isn’t aware of Richemont holding any of its shares, Chief Executive Officer Patrick Thomas said Nov. 9. The two companies have a “good relationship” and are “the sort of people who would work in a friendly way,” the CEO also said.
Richemont “has one of the strongest brand portfolios in the industry due to product development, innovation and marketing,” plus its network of stores and franchises, Chauvet wrote before the release. He rates the stock “buy.”
Richemont sells products under 19 brands including Purdey, the luxury hunting gun maker founded in 1814, and Alfred Dunhill, the London-based maker of leather goods, fashion and lighters. Richemont and Polo Ralph Lauren Corp. created a joint venture in 2007 to sell watches.
Johann Rupert, the controlling shareholder, became CEO in April after Norbert Platt, who had held the job since 2004, stepped down for health reasons. Richemont named Richard Lepeu as deputy CEO and Gary Saage as chief financial officer in March.