Compagnie Financiere Richemont Fiscal 2006 Earnings Call 

Compagnie Financiere Richemont Fiscal 2006 Earnings Call

the Swiss luxury goods group. on 15% growth in the sales of the Maisons. Cartier and Van Cleef & Arpels. as well as 22% growth in specialist watchmaking division. While Chloe has turned around in terms of revenue and cash flow. Lancel and Dunhill are incurring losses. Richemont's share of BAT results decreased by 39% to '486 million. During the first two months of fiscal 2006. business grew around 18%.Investors Question and Answers
) on June 8. 2006.Key Investors Issues- Overall. underlying profit from the luxury businesses jumped 47% to '713 million. - Quarterly revenue was up 17% to '4. Richemont's holding in BAT is valued at around '7.6 billion.Fiscal 2005 Financial HighlightsThe group sales were up by 17% to '4.308 million.Excluding the impact of Hackett. group sales were up 18%. Both retail and wholesale increased in a similar fashion by 17% and 18% respectively. The retail performance is largely due to Cartier. but as also due to the strong growth at MontBlanc and Van Cleef & Arpels. and the exceptional performance of Chlo'. The wholesale performance reflects mostly the specialist watchmakers trading at plus 22%.During the year. the Euro appreciated slightly versus the Swiss Franc while it rose by 1.9% versus the Yen. On the other hand. the Euro depreciated 3.3% against U.S. dollar. The recovery of the dollar in particular from April 2005 until December 2005 has contributed to the strong performance during the period.All regions showed a double-digit increase in sales.European sales grew by 15% reflecting growth in all major markets. In Europe. all the markets grew for the second consecutive year. due to an increase in tourism supported by a weaker euro and improved local economies. The performance of the UK has improved slightly while Switzerland and Italy have the best performance in Western Europe. The Middle East and Russia that represent respectively 9% and 3% of the European sales continue to grow strongly up by 33% and 42% respectively.Sales in Japan grew by 13% with a strong performance from the specialist watchmakers as well as MontBlanc and Cartier.Sales in Asia-Pacific were buoyant despite the challenging comparative base. The 19% increase reflects the strong performance in Hong Kong. and enrolled into China. In Asia-Pacific all the markets but Korea experienced strong double-digit growth despite challenging days. Hong Kong. the group's fourth largest market. grew by 21% on top of the strong drive in natural side due to a strong local economy and high level tourism especially from Mainland China. China already represents 13% of the region sales and close to 3% of the group sales. This is the third largest market in Asia-Pacific behind Hong Kong and nearly on par with Taiwan. Cartier. MontBlanc and Dunhill are now operating their own distributions subsidiaries in Mainland China.Sales in the Americas boomed again despite Hurricane Katrina. and stock exchange relativity. Within the Americas. the domestic US market accounts for some 75% of sales. Sales there rose by 27%. reflecting the excellent performance of the Jewellery Maison. specialist watchmakers. in particular IWC and Officine Panerai and Chlo'. which more than doubled sales in the region.Sales increased at double digit rates in nearly all segments.Chlo' showed the best performance in percentage terms with growth of 100%. The jewellery Maisons. which represents 52% of Richemont sales. reflecting Cartier strong performance and higher rate of growth at Van Cleef & Arpels. The company's specialist watchmakers have enjoyed an excellent performance. growing at a very strong 22%. All the watch brands grew at more than 10% and now represent over a quarter of the growth sales. Equally MontBlanc has experienced double-digit growth. particularly driven by the performance of watches and leather as well as its retail network.Alfred Dunhill and Lancel sales rose effectively by 8% and 11% respectively. Hackett were sold in June 2005 and Old England was sold in March 2006. The combined sales represented around '18 million versus '53 million for the prior year. The other businesses segments now consist of Chlo'. primarily Purdey and other smaller operations.By product category. watches remain the main driver of the sales.Watches remain the main driver of the total increase in value plus '203 million followed Jewellery at plus '167 million. Jewellery growth reflects the strength of Cartier and Van Cleef & Arpels as well as of contribution of cash Pasha and the successful launch of the MontBlanc seasonal jewellery line. Writing instrument rose by 10% which is quite a great result given the evolution of these market. Leather enjoyed the highest growth rate from a lower base. All the firm's Maisons involved in leather showed double-digit growth in the leather sales with a particular outstanding achievement from Chlo'.During the year. the gross margin rose by 1.6 points to 63.1% reflecting an improvement in virtually all Maisons.This increase can be attributed to 2 main factors. The good use of the company's manufacturing capacity as well as launch of new products with better margin.





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