Richemont Says Full-Year Profit Rose 30% on Currencies

Cie. Financiere Richemont SA, the maker of Cartier jewelry and IWC watches, said full-year net income rose about 30 percent, more than analysts expected, as the dollar’s strength against the euro boosted sales growth.

Sales advanced 14 percent, the Geneva-based luxury-goods maker said in today in an unscheduled statement ahead of the scheduled May 16 results. Analysts expected a 25 percent gain in net income, according to the average of 17 estimates. The stock rose as much as 6.2 percent, the biggest gain in eight months.

“This is a respectable outcome,” as Richemont was dealing with weakness in sales of its lowest-priced steel Cartier watches and as China cracks down on the practice of giving luxury goods as improper gifts, Thomas Chauvet, an analyst at Citi, wrote in a note to clients.

Currency shifts, including a stronger dollar against the euro, boosted sales growth by 5 percentage points, helping damp the effect of a weaker market for Swiss watches. Richemont got more than half its sales in the prior full-year from the Americas and the Asia Pacific region, where countries such as China have currencies linked to the dollar. Still, net income rose at the slowest pace in three years.

“There is clearly a slowdown in demand for watches from China, and Richemont is especially exposed to watches,” Mathew Menezes, an analyst at Avior Research, said by phone from Johannesburg. “Even so, the slowdown is very broad-based and Richemont has positioned themselves uniquely in the high end-range, so I think their top line growth is doing O.K.”

Hermes, LVMH

The stock traded 5.4 percent higher at 71.80 Swiss francs as of 9:45 a.m. in Zurich, bringing the gain in the past year to 33 percent. Richemont shares touched a record 81.45 francs on Jan. 18.

Hermes International SCA said yesterday that sales of timepieces declined 5.3 percent, excluding currency shifts, as the Chinese market slowed. LVMH Moet Hennessy Louis Vuitton SA, the world’s largest maker of luxury goods, said last week that retailers bought fewer watches than expected in the first quarter.

The dollar was on average 6.9 percent stronger against the euro during Richemont’s fiscal year. The owner of the Dunhill accessories brand said Swiss stock exchange rules required the announcement because of how much the results differ from last year’s. Operating profit rose 18 percent, matching analysts’ estimates.

Declining Exports

Switzerland’s watch exports rose 0.6 percent in March as shipments to China dropped 31 percent, the fourth monthly decline, the Federation of the Swiss Watch Industry said today. First-quarter export growth slowed to 2.4 percent after the 11 percent expansion in 2012.

Swatch Group AG Chief Executive Officer Nick Hayek said last month the industry needed to “calm the spirits” on expectations. Growth in the market will probably be 5 percent to 10 percent this year compared with rates of as much as 30 percent in the past, Hayek said at the time. Swatch’s brands include Omega and Longines.

(Updates with currency effect in fourth paragraph.)
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