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Richemont Gains on Jewelry Maker’s Profit Growth Forecast

Richemont Gains on Jewelry Maker’s Profit Forecast
A pedestrian walks past a Cie. Financiere Richemont SA's Cartier brand store in Osaka. Photographer: Tomohiro Ohsumi/Bloomberg

Cie. Financiere Richemont SA rose as much as 7 percent in Zurich trading after the second-biggest luxury-goods company forecast fiscal first-half profit to rise 20 percent to 40 percent.

Operating profit in the six months through September will probably also increase within that range, the Geneva-based company said today in a statement. The median of two analyst estimates compiled by Bloomberg is for an 18 percent gain in operating profit.

“Foreign exchange is a main driver, especially on margin, as costs are in euros or Swiss francs, but the majority of sales is in U.S. dollars,” said Rene Weber, an analyst at Bank Vontobel.

Richemont has benefited from higher demand in the U.S., where the dollar was 13 percent higher against the euro on average so far this fiscal year, Weber said. Richemont joins luxury goods rivals including LVMH Moet Hennessy Louis Vuitton SA and Prada SpA, which today said first-half sales rose 37 percent, in saying that demand is growing.

The global demand may help offset a slowdown in China, where demand has eased in recent months. Retail sales of jewelry, watches and clocks in Hong Kong, the biggest market for Swiss timepieces, increased 3.1 percent in June and 2.9 percent in May, compared to growth rates between 15 percent and 18 percent in the first four months of 2012, according to official statistics.

Richemont traded 5.7 percent higher at 59.25 francs as of 1:16 p.m. in Zurich. A close at that level would be the highest since March 16.

U.S. Strength

“The U.S. is quite strong,” Weber said. “Last year 80 percent of growth was coming out of Asia, but this year we have all regions bringing in the growth.”

The company gets more than half of its revenue from its Cartier and Van Cleef & Arpels jewelry brands and about a quarter from luxury watch brands including Jaeger-LeCoultre.

Richemont said revenue rose 24 percent in the first four months of the fiscal year. Excluding currency effects, sales rose 13 percent. The owner of the Vacheron Constantin brand, which reports in euros, said it made the announcement because the Swiss stock exchange requires companies to say when they expect a significant deviation in profit from the year-ago period.

“At the start of the year, Richemont was being cautious on its operating margin assumptions,” said Jon Cox, head of Swiss research at Kepler Capital Markets in Zurich. “I suspect consensus operating profit estimates for the year could come up by 10 percent.”

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