Richemont plans cash return to investors fuelled by record sales and profits

Richemont is planning to return cash to investors after jewellery sales and a rebound in China drove the Swiss luxury group to record earnings.

Shares rose more than 5 per cent on Friday after the earnings release. They have risen 31 per cent this year.

The owner of jewellers Cartier and Van Cleef & Arpels will offer a special dividend of SFr1 a share on top of an increased ordinary payout of SFr2.50, Richemont said on Friday. The company also plans to buy back as many as 10mn of its A shares, representing 1.7 per cent of its capital.

Group sales for the year ended March 31 climbed 14 per cent at constant exchange rates to hit an all-time high of nearly €20bn while operating profits came to a record €5bn, up by a third from the previous 12 months and ahead of expectations. Net cash rose €1.3bn to €6.5bn.

At Richemont, the fourth quarter revealed a “significant” sales increase as the Asia-Pacific region recovered following China’s removal of Covid-19 travel restrictions.

Richemont chair Johann Rupert said that while Chinese tourism was beginning to pick up again, large groups have yet to return as flights remain expensive. Most analysts expect international Chinese tourism, a key driver of global luxury sales, to pick up more significantly from the second half of this year.

Rupert also noted that demand has been slowing in the US since November, reflecting analyst expectations for a slowdown there and trends reported by other luxury companies in the sector’s biggest market.

“Economic volatility and political uncertainty look set to remain features of the trading environment. The group will therefore seek to maintain the necessary agility to manage fluctuating levels of demand,” Rupert said.

The Swiss company joins other groups in the luxury sector, such as France’s LVMH and Hermès, in reporting bullish earnings on the back of sales picking up in Asia, in particular China. Gucci owner Kering, however, has lagged behind. Defying geopolitical ructions and rising inflation, the global luxury sector has boomed in recent years, the strength of its recovery after a 2020 pandemic contraction surprising industry experts with double-digit growth in 2021 and again last year.

Rupert, who controls the group, reiterated that the company was not for sale, after rumours that LVMH had set its sights on acquiring it resurfaced in recent months. “We’re in constant dialogue and we respect each other’s independence,” he said.

Richemont had also turned down a deal with Kering proposed by bankers two years ago, Rupert said.

Richemont reported a €3.6bn loss from discontinued operations, largely due to a €3.4bn non-cash writedown on ecommerce platform Yoox Net-a-Porter. The company is in the process of separating the ecommerce business from its core operations after announcing a plan to sell a majority stake in the unprofitable platform to an Emirati investor and online rival Farfetch last year. The deal is currently being examined by regulators.

“The polarisation between strong brands with iconic pieces and weaker ones continued unabated, and accelerated in recent months due to high inflation,” wrote Jean-Philippe Betschy at Vontobel, noting that those with strong pricing power are likely to be the winners in the coming months.

“Richemont is very well positioned with Cartier, Van Cleef & Arpels or Vacheron Constantin. The company has everything in place for further market share gains and further value creation,” he added.