The last quarter of the year has eventually downscaled the financial statements of the whole business year, 2019/2020, ended on last March 31st. According to Richemont estimates, the pandemic impact is going to cause the brand to lose, in terms of sales, 800 million euros.
On top of that, 450 million euros as to EBIT and 350 million euros more as to cash flow. Such is the gist of the story: at the end of the year, the Swiss group sales proved quite steady (the same goes for their division including leather goods and accessory brands), but profit margins have been decreasing. “We might be facing, ahead of us, a heavy economic crisis, which could go on for 12, 24 or 36 months. For the time being, we cannot make any relevant prediction”, pointed out President Johann Rupert.
The last quarter downscales annual statements
Compagnie Financière Richemont had to deal with a downturn in sales, which dropped by 18% at current rates of exchange and by 19% at fixed rates of exchange (-67% in Hong Kong), in the fourth quarter of the financial year, that is, from January to March 2020. Such performance has heavily affected their annual statements: at the end of the year, sales amounted to 14.24 billion euros.
Which means +2% at current rates of exchange and much the same at fixed rates of exchange. The overall result turns out to be in line with analysts’ expectations, quoted by Reuters. Operating income decreased by 22% (1.5 billion euros), while profits dropped by 67% (931 million euros), much lower than 1.29 billion euros, formerly estimated by Reuters analysts.
Leather goods and accessories
Sales achieved by “Leather goods and accessories” department amounted to 1.415 billion euros, therefore accounting for around 10% of the group’s overall turnover. They have been increasing by 1% at current rates of exchange, whereas they went down by 1% at fixed rates of exchange. Leaving aside online sales, they decreased by 10% at fixed rates of exchange and dropped by 8% at current rates of exchange.
Emergency strategies
Looking at Richemont business strategy, the group is planning to carry out a digital boost in its brands and implement, at the same time, a closer partnership with Alibaba through their joint venture, named Feng Mao. Furthermore, they are also going to launch, on Tmall, their Net-A-Porter flagship store.
“Our fashion houses will successfully manage to hold up despite such tough times: Richemont sound financial statements will support them”, commented Johann Rupert while emphasizing a few comforting messages coming from China. “Since the reopening of our boutiques, 462 in total, we have been facing a remarkable demand”. Amongst various strategies implemented by the Swiss group, they have moved towards higher cost flexibility. As regards sales, they will be focusing on the online ones: “It turned out to be a paramount strategy and it is going to be like that in order to expand our activity in the future”.
Read also:
- The two ways of Richmont: between rumours and cessions is there the renovation or the disposal of the fashion segment?
- Luxury is saving alligators in Louisiana, says Richemont
