Posted by on January 18, 2004 - 06:52AM cet - IP :
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Richemont share picks up speed as the rich spend more

Upgrade from Swiss bank lifts investors' confidence in group, writes Marcia Klein

Counting the cost of fashion: For well-heeled clients of Richemont, the 'right' clothes, such as Chloe wear, are just a start. Accessories such as Piaget watches and Montblanc pens are a must.

Investors in Swiss luxury goods group Richemont, encouraged by tentative signs of a recovery in spending by the upper classes, sent the share price higher late this week against a declining overall market.

At one point on Thursday, following release of a positive sales update, the share gained 3% to top R18. The share gained further ground on Friday and went on to reach R18.31.

Its announcement that sales in the quarter to December were up 4% in constant currency terms compared with the previous year was well received.

The price has also been boosted by the weakening rand and by reports that Swiss bank Sarasin upgraded Richemont to a buy from the bank's previous neutral position on the stock.

At actual exchange rates, however, Richemont's sales for the quarter dropped 4%. This largely reflected the continuing strength of the euro against the dollar and the yen.

Richemont had a particularly good month last month, with sales at constant exchange rates growing by 10%.

Over the three months, sales in Asia-Pacific (up 20%) and the Americas (up 18%) were strong, while sales dropped in Europe and Japan.

Sales in Europe were affected by the weak economic climate and low tourist numbers. Sales in the important markets of France, Italy and Germany were down, although sales in the UK, Spain and Russia were up.

Asia-Pacific sales were buoyant on the back of relatively strong economies in the region and a marked increase in travel to Hong Kong. However, sales in Japan were down.

Richemont said US sales were buoyed by an improving economy, but the growth in sales in dollar terms was "entirely offset by the significant weakening of the dollar against the euro".

Watches and pens were the best sellers, while jewellery sales were only marginally higher.

Richemont said Cartier, the group's largest business, "reported modest growth during the quarter, reflecting the importance to the brand of the depressed European and Japanese markets".

Watchmakers Jaeger-LeCoultre, Piaget, Baume & Mercier, IWC, Vacheron Constantin, A Lange & Sohne and Officine Panerai "enjoyed a strong quarter".

Montblanc, which sells writing instruments and leather goods, showed good growth.

In textile, leather and other businesses, sales growth at Alfred Dunhill and Chloe was offset by continuing weakness at Lancel.

The Richemont share price has been under pressure for some time after a litany of woes for the group, including the effect of the SARS virus and its high cost base.

In the six months to September, operating profit fell 56%. Riche- mont is revisiting costs and management structure and looking at underperforming businesses.

By the Sunday Times
on the 18th January 2004