Richemont, the Swiss purveyor of luxury goods and owner of brands like Cartier, Van Cleef & Arpels, Piaget, Jaeger-LeCoultre announcing its audited consolidated results for the year ended 31 March 2016 (FY 2016) said that sales grew by 6% (at constant exchange rates, sales decreased by 1%) to € 11,076 million as compared to € 10,410 million for FY 2015; and operating profit fell by 23% to € 2,061 milllion as against € 2 670 million, for the previous year. 

The Company explained the decrease in operating profit saying that this was due to “a non-recurring property disposal gain of € 234 million in the prior year and current year restructuring and write-down charges of € 97 million”.

“Net profit for the year increased by 67% to € 2,227 million, primarily due to a non-cash post-tax gain of € 639 million relating to the merger of the NET-A-PORTER and YOOX Groups, and the non-recurrence of losses largely due to the revaluation of the Swiss franc in the prior year of € 686 million,” the Company added.

Cash flow from operations of € 2,419 million and the net cash position of € 5,339 million were broadly in line with the prior year.

“In the first six months of the year under review, Richemont reported double-digit growth, followed by a decline in the second half,” said Johann Rupert, Chairman. “Our concerns over geopolitical risks and the impact on the behaviour of our clients proved justified. Europe turned negative in mid-year and trading conditions in Hong Kong and Macau remained difficult. Only mainland China showed good growth.”

In terms of regions, Europe’s share of overall sales stood at 31% and amounted to € 3,388 million as against sales worth € 3,067 million for FY 2015; thus registering a 10% growth at both constant and actual exchange rates.  

Sales in the markets of the Middle East and Africa saw a strong growth of 16% (at actual exchange rates) to reach € 975 million as compared to € 841 million in the previous year; and accounted for 8% of Group sales.

The Asia-Pacific region accounted for 36% of the Group’s total sales and amounted to € 3,937 million for FY2016 as compared to € 4,100 million worth of sales reported in the previous year. This represents a decrease of 13% at constant exchange rates and 4% at actual exchange rates.

Total sales to the Americas stood at € 1,745 million for the period as against sales of € 814 million achieved in the previous year; representing a 1% drop at constant exchange rates and a 10% increase at actual exchange rates. “The Americas region, which accounted for 16% of Group sales, was subdued throughout the year,” the Company commented. “Domestic demand for jewellery largely offset soft demand for watches.”

Japan presented an upbeat picture with sales for FY2016 touching € 1,031 million; up from   € 814 million sales of FY 2015 by 20% at constant exchange rates and 27% at actual exchange rates.

“In Japan, sales to tourists increased during the year, partly reflecting exceptionally favourable exchange rate effects for incoming visitors,” Richemont explained.  

While the Group’s retail sales touched € 6,142 million in the period as compared toretail sales worth € 5,436 million in the previous year; sales of the wholesale channel dipped slightly to € 4,934 million from € 4,974 million in FY 2015.

“Sales through the Maisons’ directly operated boutiques and e-commerce accounted for 55% of Group sales,” Richemont said. “During the year as a whole, sales through those channels increased by 13% and continued to outperform the more volatile wholesale channel.”

The jewellery segment performed comparatively strongly, with sales worth € 6,048 million for the period as against  sales of  € 5,657 million for the previous year; while the specialist watchmakers segment sales stood  € 3,225 for FY 2016  as against € 3,123 (+ 3%) for FY 2015.

“The Jewellery Maisons – Cartier, Van Cleef & Arpels and Giampiero Bodino – reported a 7% growth,” reported Richemont. “The Maisons saw good demand for their jewellery collections, but overall demand for watches collections suffered due to a challenging environment in the Asia-Pacific and Americas regions. Despite a number of flagship closures for renovation, the boutique networks reported growth, whereas wholesale sales were lower than the comparative period.”

The Richemont board has proposed a dividend of CHF 1.70 per share, which is  an increase of 6% over the previous year.

Taking stock of the current market scenario Rupert commented: “April sales declined by 18% and 15% on a reported and constant rates basis. All regions reported a decline in sales. At constant exchange rates, only the Middle East & Africa posted growth.”

He added: “In the near term, we are doubtful that any meaningful improvement in the trading environment is to be expected. We are notably addressing the challenges faced by the watch industry.”