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Richemont H1 profit drops as Covid-19 hits sales

By Prachi Singh


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In the six month period under review, Richemont said, trading was significantly impacted by the worldwide spread of the Covid-19 pandemic and its resulting negative impact on trading conditions. Sales decreased by 26 percent at actual exchange rates and by 25 percent at constant exchange rates to 5.5 billion euros. The company added that as lockdown restrictions were eased, sentiment and sales momentum gradually improved, and the decline in sales for the second quarter was limited to 5 percent at actual exchange rates and 2 percent at constant exchange rates. Gross profit decreased by 31 percent to 3,165 million euros and gross margin stood at 57.8 percent, operating profit contracted by 61 percent to 452 million euros, resulting in an operating margin of 8.3 percent, profit amounted to 159 million euros, a 710 million euros decline and earnings per share decreased by 82 percent to 0.281 euros on a diluted basis.

“Throughout the first six months of our financial year, the Covid-19 pandemic impacted our trading and operations with unprecedented levels of disruption. All regions, channels and business areas were affected, notwithstanding a 78 percent increase in China versus the prior year period at actual exchange rates. Although the pandemic has hampered sentiment and demand around the world, we have continued to make good headway on key digital initiatives and further advance on our journey towards New Retail,” said Johann Rupert, Chairman of Compagnie Financière Richemont SA in a statement

Richemont reports sales decline across core geographies

For the first half of the fiscal year, the company said, Europe recorded the highest rate of decline alongside Japan, with sales down 44 percent year-on-year. France, Italy, Switzerland and the United Kingdom were particularly affected by a significantly lower level of tourist activity, as were the Jewellery Maisons, Specialist Watchmakers and Fashion & Accessories Maisons. Online Distributors, although initially impacted by temporary fulfilment centre closures, showed the most resilient performance. Compared to retail and wholesale sales, which contracted at significant double-digit rates, online retail sales fared better, with a high-single digit decline. The contribution of Europe to group sales was reduced to 22 percent from 30 percent in the prior year period.

In Asia Pacific, the year-on-year decline in sales was contained to 4 percent as the sales momentum significantly improved in the second quarter of the financial year with strong double-digit growth. All markets registered lower sales for the half year with the exception of China, where sales rose by 83 percent. From the month of July, sales growth in Asia Pacific resumed. The region raised its contribution to group sales from 37 percent in the prior year period to 47 percent.

For the six month period under review, the Americas region posted a 31 percent reduction in sales. All channels saw lower sales including online retail sales which decreased by a low-single digit rate overall. Of note, when excluding The region’s contribution to group sales was reduced from 18 percent to 16 percent. In Japan, the 44 percent decrease in sales reflected the impact of Covid-19 with temporary closures, weak domestic consumer confidence and a halt in tourism. The country represented 7 percent of overall sales, compared to 9 percent in the prior year period. Sales in the Middle East and Africa were 5 percent lower than the prior year period. The contribution of Middle East and Africa to Group sales increased from 6 percent in the prior year period to 8 percent.

Richemont’s retail channels witness a sales decline

The company added that the 22 percent decrease in retail sales reflects the severe disruption due to Covid-19. The Maisons’ 1,179 directly operated boutiques contributed 53 percent of group sales, compared to 52 percent in the prior year period. Notwithstanding the temporary closure of the Online Distributors’ fulfilment centres due to Covid-19 in the first quarter of the financial year, the decline in sales was limited to 3 percent, supported by a 17 percent rebound in sales in the second quarter. In the first half of the financial year, Asia Pacific, particularly China with triple digit online retail sales growth, and the Middle East and Africa showed strong growth.

The wholesale channel was the most affected by the global pandemic. Wholesale sales including royalty income contracted by 42 percent versus the prior year period, impacted by temporary points of sale closures, social unrest in key markets and low to no footfall at airports’ duty free shops.

For the period, Richemont said, sales at the jewellery maisons were 18 percent lower than in the comparative period. Following a drop of 41 percent for the first quarter of the financial year, sales returned to positive territory, with 4 percent growth in the second quarter. Mid-single digit sales growth in Asia Pacific and high-single digit sales progression in the Middle East and Africa partly offset a marked contraction in the other regions, which were severely impacted by temporary closures of stores, a halt in tourism, social tension and muted consumer confidence.

Sales at the Specialist Watchmakers were 38 percent lower than in the prior year period, particularly impacted by the Covid-19 pandemic and their strong reliance on multibrand retail partners. The rate of sales decline moderated from 56 percent in the first quarter to 18 percent in the second quarter, supported by a strong performance in China. Wholesale sales contracted more than retail sales, while online retail sales grew by triple digits driven by participation in online initiatives such as the Watch Show on the Cloud and Watches & Wonders Shanghai, which introduced their creations to the Chinese market, as well as by the opening of flagship stores for IWC Schaffhausen, Jaeger-LeCoultre, Panerai, Piaget and Vacheron Constantin on Tmall Luxury Pavilion.

Online Distributors reported a 21 percent decrease in sales, while in the second quarter, sales increased by 2 percent. ‘Other’ including the Fashion and Accessories Maisons and the group’s watch component manufacturing activities reported sales decrease by 42 percent for the period, reflecting a decline of 59 percent in the first quarter and 24 percent in the second quarter.

Picture:Olaf Tamm, Hamburg Germany for Richemont

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