Richemont Announces Profit Decline in H1 Earnings – Impact of Weak Demand in China on Watch Division

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On October 8, luxury conglomerate Richemont announced its H1 earnings, revealing stable sales but declining profit. The Specialist Watchmakers division suffered particularly due to weak demand in the Chinese market, pulling down overall performance.

For the six months ending September 2024, Richemont’s sales amounted to €10.077 billion, a 1% decrease year-over-year. Operating profit stood at €2.206 billion, marking a 17% decline from the previous year. Consequently, the operating profit margin dropped from 26.0% to 21.9%, highlighting the company’s challenges.

The profit decline was primarily due to sluggish demand for luxury watches in the Chinese market. Sales in the Asia-Pacific region as a whole dropped by 19%, affected by delayed recovery in China. The Specialist Watchmakers division reported a 17% sales decline year-over-year, with the operating profit margin falling to 9.7%. Richemont maintains a cautious approach to operations in this market amid ongoing fluctuations.

On the other hand, Richemont achieved strong performance in other regions. Sales in the U.S. increased by 10%, while Japan saw a 32% rise, reinforcing the U.S. as Richemont’s largest individual market. This balanced regional sales composition contributed to overall stability for the group.

In the Jewellery Maisons division, brands like Cartier, Buccellati, and Van Cleef & Arpels continued to perform robustly, with sales increasing by 2% year-over-year and maintaining a 32.9% operating margin. Growth in direct-to-client sales supported the division, with direct sales accounting for 76% of the group’s overall revenue.

In the “Other” business area, brands like Alaïa and Peter Millar showed strength, but overall, the segment recorded an operating loss of €52 million, partly due to weaker performance from certain brands within the Fashion & Accessories Maisons.

Key accomplishments for the first half included the completion of the acquisition of Italian jewelry Maison Vhernier, the conclusion of a share exchange agreement with Mytheresa, the appointment of a new CEO, and the establishment of new leadership for Cartier and Van Cleef & Arpels. Despite the continued uncertain market environment, Richemont is positioned to pursue long-term growth strategies, backed by a solid cash position of €6.1 billion.

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