Richemont FY Numbers - Cash Flush

Luxury goods company Richemont, reported its full-year numbers with a surprise dividend cut and a 19% drop in revenues. The Rupert run business also sold about EUR2 billion worth of bonds, in order to bulk up its balance sheet as a hedge against the uncertain future we find ourselves in at the moment.

The company's full-year revenue figure came in at EUR14.24 billion, a 2% increase year-on-year, but profits were down 67% to EUR931 million. This is all partly due to store closures in main hubs like Hong Kong where sales dropped by more than two thirds due to the earlier lockdown.

The maker of Cartier is not so optimistic; Chairman Johann Rupert said that the economic disruption from this pandemic could last for as much as three years even though 462 of its stores have started reopening in China. However, this won't be enough to help the company return back to its growth as overseas spending by Chinese tourists will be non-existent until flights are back in the air and operating at full capacity.

Watches and Jewellery tend to get hit the most during times of economic crises, as compared to fashion items and leather goods. However, the big positive for Richemont is that it consolidated the Yoox-Net-A-Porter businesses at a perfect time because this pandemic can only accelerate the shift online, and Richemont is ready to make those sales. Under 'normal' circumstances, this shift could have taken as long as 5 to 10 years to materialise

Richemont has over EUR2.4 billion in cash on hand, and Rupert says this is enough liquidity to last for three years. Here at Vestact we still like Richemont a lot, and it has been one of our investments that has been very stable during this pandemic thanks to the managements defensive stance as well as their well-timed bet on "online".