Luxury goods group Richemont saw a significant increase in profits during the past fiscal year. But things aren’t going quite as well as they used to.
The public has rarely seen Richemont’s Chairman of the Board, Johann Rupert, so exasperated.
“You really need to come up with better questions,” the seasoned executive snapped time and again at financial analysts and media representatives during the presentation of results for the past fiscal year.
Harsh Responses
Someone asked Rupert how he assessed business developments in China.
“How should I know?” the Richemont chairman retorted sharply.
Rupert also refused to provide a comparison with the competition, where the luxury goods group has reportedly gained market share. “That’s your job,” was all he said.
Champagne mood has faded
Normally, the seasoned manager from South Africa is talkative and enjoys explaining his world.
After all, he has a good rapport with U.S. President Donald Trump and knows his way around Asia.
Given a 27 percent increase in net profit to 3.5 billion Euros, the Richemont management could certainly have been in a more celebratory mood.
Revenue rose by 5 percent to 22.4 billion Euros.
At constant exchange rates, the increase would have been as high as 11 percent, the Geneva-based group has calculated.
Weak dollar weighs on results
But, as always, the devil is in the detail.
The boom that followed the coronavirus pandemic has faded. But positively, the Americas region did grow quite well.
But the weak dollar immediately threw a spanner in the works for the group, which reports in euros.
In Asia, China is struggling to get back on its feet, even though there are said to be slight signs of improvement.
Time Dilation
Jewelry from the main brands Cartier and Van Cleef & Arpels is selling well worldwide.
But the watch segment – which includes IWC, Jaeger-LeCoultre, Piaget, Vacheron Constantin, Panerai, and others – is barely keeping time.
Revenue ticked back by 4 percent, and operating profit plummeted by 40 percent to just over 100 million Euros.
Rupert, too, declined to reveal what the future holds.
The company admitted that it doesn’t really know much about watches and, as is well known, only entered that industry through acquisitions.
One would have expected more from a strategic thinker.
Investments drop 11 percent
In such uncertain times, companies usually cut costs significantly. This is also the case at Richemont.
Marketing expenses fell noticeably from 10 percent of revenue back to 9 percent.
The luxury goods group also cut capital expenditures by 11 percent to just around 1 billion Euros.
Inventories are rising, causing the return on capital employed to drop from 31 to 28 percent.
Shareholders are not expected to go without, however, given the sharp increase in profits, which is attributable to the sale of a business that was losing billions.
Stock market hype fades
A 10 percent dividend increase will be proposed at the annual general meeting.
Initially, euphoria reigned on the stock market, and the shares rose by over 5 percent.
But after Rupert’s peculiar appearance and with no details on business performance, spooked investors chose to flee.
Resulting in Richemont shares ultimately closing in the red.
May 22, 2026/kut./ena.
