FX.co ★ Richemont H1 Profit Hits On Weak China Demand; Stock Dips

Shares of Compagnie Financiere Richemont AG experienced a decline of approximately 4% during morning trading in Switzerland, following the luxury goods company's report of significantly reduced profits for the first half of the year. This decline is attributed to an increased loss from discontinued operations coupled with a slight decrease in sales. The improved performance across other regions was unable to counterbalance the lackluster demand in the Asia Pacific region, particularly in China.

Chairman Johann Rupert commented, "Looking ahead, while I maintain a cautious outlook due to the uncertain environment, I am confident in our capability to navigate both current and future economic cycles and to deliver sustained long-term value."

For the first half, the profit attributable to shareholders of the parent company fell to 458 million euros from 1.51 billion euros in the previous year. Earnings per 'A' share declined to 0.779 euros from 2.601 euros last year.

The recent financial results were primarily affected by a loss of 1.27 billion euros from discontinued operations, largely due to a non-cash write-down of YOOX NET-A-PORTER (YNAP), compared to a loss of 655 million euros in the previous year.

Profit from continuing operations dropped 20% to 1.73 billion euros from 2.16 billion euros a year prior. Operating profit decreased by 17% to 2.21 billion euros from 2.66 billion euros, leading to an operating margin of 21.9%, a decrease of 410 basis points from the previous year's 26%.

The disappointing results were largely due to reduced sales in the Specialist Watchmakers division, minor gross margin erosion, and continued investment in Maisons’ long-term growth strategies. Revenue for the period fell by 1% to 10.08 billion euros from 10.22 billion euros the year before.

However, sales from continuing operations remained steady at constant exchange rates, benefiting from the company’s balanced geographic portfolio and sustained strength in its Jewellery Maisons segment.

Richemont reported strong sales growth across most regions, spearheaded by the Americas and Japan, with increases of 10% and 32%, respectively. Europe and the Middle East & Africa also demonstrated robust sales growth. These gains were, however, offset by a 19% decline in Asia Pacific sales, predominantly driven by a downturn in China.

In Switzerland, Richemont shares were trading at 122.50 francs, reflecting a decline of 4.1%.