No recession for the super-rich

If you have tons of money there's no such thing as a recession.

7 Aug 2012

At least that what seems to be the case for Compagnie Financière Richemont as it shares soared over 7% to reach an intraday high of R50,59 yesterday after the company said first half profits could rise as much as 40%.

The maker of Cartier jewellery and Jaeger-LeCoultre watches continues to ride the luxury boom as Asian shoppers snap up high-end goods at home or while on holiday in Europe. Sales of posh goods in other emerging markets have also been buoying the Swiss luxury goods purveyor's performance.

A bellwether for the luxury goods sector - the group's strong growth is likely to calm investor fears over the sustainability of the upmarket goods boom‚ as concern lingers around an economic slowdown in China.

"Strong trading indicates a likely increase in operating and net profit for six months of between 20% and 40% against the comparative period last year.

"Exchange rate movements may significantly impact net financial income/expense and therefore net profit for the period‚" the Geneva-based company said.

Aslam Dalvi‚ equity analyst at Kagiso Asset Management‚ said that while there are some short -term macro challenges‚ the fundamentals of the business remain sound.

"The company's high exposure to emerging markets‚ in particular Asia‚ should support medium-term earnings growth‚" Dalvi said.

Trading for the four-month period ended July showed sales rising 24% on a reported basis and 13% on a constant currency basis against the comparative period‚ Richemont said.
Sasha Naryshkine‚ asset manager at Vestact said this was "not bad for tough times".

"Let us presume for a second that Richemont profits come in in the middle of the range - at the half year stage to September 30 2011‚ the company recorded operational profits of €1,075-billion.

"On an earnings per share basis‚ and based on an increase of 30% the next number should clock around €1,64-billion‚" Naryshkine said.

According to Bain & Company‚ global luxury goods sales are defying initial concerns over Eurozone turmoil and fears of a cool down in emerging markets‚ and will exceed €200-billon in 2012.

In a study released in May‚ the management consulting company said Chinese consumers‚ including their spending as tourists, accounted for over 20% of global luxury sales‚ while Asian consumers (i.e.‚ adding Japan‚ Korea‚ and South-east Asia) accounted for more than 50%.

Richemont's two French rivals LVMH and PPR have also benefitted from relentless demand for luxury brands.

PPR which owns brands such as Gucci‚ Balenciaga and Brioni posted a 17% rise in revenue for the first half of 2012 to €6,4-billion‚ while LVMH‚ the maker of Hennessy cognac and Fendi bags reported revenue of €13-billion in the first half 2012‚ an increase of 26%.

Also on Monday‚ Italian fashion group Prada recorded revenue of €1,54-billion in the first half ended July 31‚ a 36,5% increase‚ driven by robust demand from the Asia Pacific region.

Source: I-Net Bridge

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