Richemont 6M - Numbers Hurt By HK Protest

On Friday morning before the market opened Richemont released their six months numbers. Unfortunately they missed market expectations resulting in the stock dropping 5.7%. One of the main reasons for the miss is due to the protests currently going on in Hong Kong. With all the unrest that has been around since June, tourism numbers have plummeted, meaning the number of customers going through their stores has also dropped.

Another reason for the miss is due to the group going through a transition phase. They are making the online sales channel a more significant part of their business model. The shift to online means that they are having to spend and invest in the future of the business, which translates into lower profits now.



Here are the numbers: their sales increased by 6%, operating profit was up 3% and the net cash position was up EUR 186 million. The online segment accounts for 17% of sales but is still loss making. Importantly, online sales increased by 28% for the period. A few more halves like that and the group will be making money.

The move to online also allows the group to diversify further because customers on a relative basis buy more of their leather products and clothes through the online platform. What probably excites me the most about the future is a JV that they are doing with Alibaba to have their NET-A_PORTER online shop operate through Alibaba channels.

All in all, sales grew in every region. They still own timeless brands, which consumers love. I suspect that the share price will continue to go sideways while they go through this transition phase though. Continue to hold this one as a defensive, Rand hedge position.