LONDON — Shares in Compagnie Financière Richemont were up 3.7 percent to 83.45 Swiss francs, or $86.43, in mid-morning trading on Friday, following a double-digit drop in the company’s first-half net profit.
Richemont, parent of brands including Cartier, Van Cleef & Arpels, IWC and Dunhill, said profit fell 23.5 percent to 907 million euros, or $1.22 billion, in the six months to Sept. 30 due to volatile trading conditions worldwide, and to charges linked to the firm’s hedging program.
All figures have been converted at average exchange rates for the periods to which they refer.
First-half sales grew 2 percent to 5.43 billion euros, or $7.33 billion, against a backdrop of uneven demand. At constant exchange rates, sales grew 4 percent.
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While sales beat consensus, the profit figure fell below expectations. Citi said in a report that it remained “overall positive” on Richemont’s prospects for stronger earnings momentum in the 2015-16 year, and would buy the stock on share price weakness.
HSBC, meanwhile, said the results were “not the bloodbath some expected” and added the outlook for Chinese demand bouncing back was positive.
Morgan Stanley pointed out that in October, the start of the second half, Richemont was working with tough comparatives from the previous year and called the group’s performance “reassuring.”
Business picked up slightly in the second half: Richemont said sales in October grew by 4 percent at actual rates, but fell 1 percent at constant rates, partly reflecting the exceptional level of high jewelry sales in the Asia-Pacific region during the comparative period.
Sales in the Asia-Pacific region – tarnished by political turmoil in Hong Kong and slackening demand in Mainland China – were down 2 percent, and in Japan they fell 13 percent.
Sales in Europe and the Middle East were up 6 percent, while the Americas region notched a 10 percent gain. Jewelry sales overall were particularly strong, rising 10 percent at constant exchange rates, according to Richemont.
Richemont’s sales performance for the half was 1 percent above consensus, but net profit – dented by 239 million euros, or $323 million, in hedging costs – missed analysts’ expectations. Operating profit was down 4.3 percent to 1.31 billion euros, or $1.77 billion.
Luca Solca, managing director at Exane BNP Paribas, noted that Richemont’s numbers confirm a “difficult demand environment” for luxury goods, and a likely low-key end to a soft 2014 for the industry.
Richemont chairman Johann Rupert called the first-half results “fairly resilient overall” given the volatility of the overall environment, with the exception of the Americas and the Middle East. He added that price increases in certain markets and new product launches helped to drive sales in the six-month period, while lower raw material prices and cost containment measures helped mitigate the “subdued” performance and the overall negative impact of foreign exchange rates.
“The external environment remains difficult ahead of the holiday trading period,” Rupert said. “Taking a longer-term view… We can look forward positively. We remain confident that demand for high quality products will continue to grow in the global market,” he added.