By Cristina Roca
Shares in Compagnie Financiere Richemont SA (CFR.EB) traded lower Friday after the company reported lower-than-expected earnings and slowing sales momentum for the first-half of fiscal 2020.
The Swiss luxury-goods group reported a net profit of 869 million euros ($961.2 million) for the period up to Sept. 30, a result that fell short of analysts' expectations of EUR971 million, according to FactSet. This was down from EUR2.25 billion the year prior, when Richemont booked a gain of EUR1.38 billion after purchasing online luxury retailer Yoox Net-a-Porter. Excluding this gain, net profit was broadly stable, Richemont said.
At 1224 GMT, shares in Richemont traded 5.2% lower at CHF75.08.
RBC's Rogerio Fujimori said the drop was due to higher-than-expected operating losses at Richemont's recently-created online distributors division, which comprises YNAP and the much smaller online watch platform Watchfinder. Richemont has in the past expressed the need to invest heavily in the YNAP business in order to ensure its long-term success.
Investors may also be concerned by signs that Richemont's key jewelry division may be losing some of its shine, at a time when the industry is buzzing about a possible takeover of U.S. jeweler Tiffany & Co. (TIF) by the luxury titan LVMH Moet Hennessy Louis Vuitton SE (MC.FR), likely increasing competition for the Swiss group's main area of business.
The owner of the Cartier and Van Cleef & Arpels jewelry brands said sales for the first half of fiscal 2020 rose 9% to EUR7.4 billion, growing 6% constant exchange rates. However, the results suggest that sales momentum for the second quarter slowed significantly to below consensus forecasts, Citi analyst Thomas Chauvet said, driven by decreasing momentum in Richemont's jewelry division both in terms of revenue and sales. At constant currencies, sales at Richemont's jewelry brands grew 5% in the first half, and the bank estimates that second-quarter growth was down to 3%, from 7% during the first quarter.
In more reassuring news, Richemont's company management struck a positive tone during an earnings call Friday, saying it sees more customers splurging on high-end jewelry in the second half of the year, which should help generate stronger growth for the jewelry division.
Sales in Asia-Pacific--Richemont's largest market--rose 7%, though this implies that sales momentum slowed sharply in the second quarter, Chauvet said. Richemont said strong growth in China and Korea helped offset a double-digit decline in the Hong Kong region.
Online distributors was the group's fastest-growing division, reporting a 32% increase in sales for the period.
The company didn't provide an outlook, but said that transforming its business to set it up for success in a more connected world would "require time, investment and flawless execution."
Write to Cristina Roca at firstname.lastname@example.org; @_cristinaroca
(END) Dow Jones Newswires
November 08, 2019 07:39 ET (12:39 GMT)Copyright (c) 2019 Dow Jones & Company, Inc.