Richemont chairman Johann Rupert has described 2018 as a year of transition and consolidation as the group’s audited accounts for the year ending March 31, 2019, were published.
Completing the acquisition of Yoox Net-A-Porter (YNAP) and pre-owned luxury watch specialist Watchfinder boosted sales, which rose by 27% to €14 billion.
Stripping out the turnover added by YNAP and Watchfinder, sales rose by a more modest 8%.
Richemont has been buying back unsold stock over recent years in an effort to better match supply to demand across its global wholesale network, and Mr Rupert suggests the re-balancing is working. The initiative is key to reducing grey market activity that has led to steep discounting hurting the group’s authorised dealers selling at full recommended retail prices.
No additional stock buy-backs were initiated in 2018-19, the report says. “The current year’s one-time charges primarily relate to previous year’s inventory buy-backs and portfolio transactions,” it states.
“Across the business areas, we are starting to see the benefits of recent initiatives targeting the qualitative improvement of our distribution network, the right-sizing of watch inventories at our multi-brand retail partners, and the adjustment of supply to the true level of end-customer demand,” Mr Rupert describes.
Drilling into performance by brand, the chairman’s statement says that jewellery maisons performed strongly, with the 2018 re-launch of Santos de Cartier watches contributing to a positive year for Cartier.
High end watches also sold well, particularly through directly operated stores, which saw double-digit growth. “The maisons generally enjoyed strong retail performance, with Vacheron Constantin, Jaeger-LeCoultre and IWC being particularly noteworthy,” Mr Rupert reports.
Investment bank Morgan Stanley estimates that almost 90% of sales for Richemont’s Specialist Watchmakers are still through wholesale, but Cartier sells almost 40% direct to consumer.
In a welcome hint towards the future direction for these brands, Mr Rupert suggests that working with multi-brand partners will remain an important part of the group’s strategy, even as its direct to consumer business develops. “By shifting to a business model in which supply is matched to end-customer demand and sales are increasingly generated in mono-brand stores, online or with fewer but stronger multi-brand retail partners, we are confident that our Specialist Watchmakers are laying a solid foundation for sound and sustainable growth,” he describes.
Little has been heard of from Watchfinder since it was acquired by Richemont for an undisclosed sum last year, and Mr Rupert merely reports that Watchfinder has delivered “satisfactory performance, building on its leading position in the UK market”. He does reiterate the group’s plan to take Watchfinder global. “Its internationalisation has begun, with an initial market entry in France,” he says.
Watchfinder is building a team in Paris focused mainly on procurement of pre-owned watches, and has launched a French language ecommerce site. The operation will grow in importance once the UK has left the European Union and it becomes more complicated to move stock across the English Channel.
Profit for the year rose by 128% to €2,787 million, mainly due to a post-tax non-cash accounting gain of € 1,378 million on the revaluation of the YNAP shares held before the tender offer.