We covered the Swatch Group yesterday, and it so happens that just recently Compagnie Financière Richemont SA had their insightful Fiscal Year 2019 Interim Results Presentation Conference Call (Earnings call). Here’s some of the key facts & statements made on the call:
The Future Is Digital
- Sales for the first half of the current fiscal year increased by 21% at constant exchange rates and by 21% at actual exchange rates. This includes the sales of YOOX NET-A-PORTER and Watchfinder. […] The level of online retail sales has jumped from 1% to 14% of group sales;
- Excluding the Online Distributors, sales for the period increased by 8% at constant exchange rates and by 6% at actual exchange rates. Most regions and all businesses — business areas saw growth, led by double-digit increases in jewelry and in the group’s directly operated boutiques. Here, watch sales expanded by double-digit rate as well;
Mind you Richemont is not a pure blooded watch company and stretches out into jewelry, writing instruments, clothing etc… More on that below.
Regional Changes
Asia Pacific, sales increased by 20% overall and accounted for 37% of the group’s total. Excluding Online Distributors, sales growth was 14%;
Europe, the second largest region, has 30% of group sales. First half sales increased by 28% overall, benefiting from the integration of YNAP and Watchfinder for whom Europe represents the largest region. Excluding these newly acquired businesses, sales posted a 1% increase;
Americas region, sales increased by 42% overall and by 13% excluding Online Distributors;
Japan, represented 8% of group sales and increased by 14% overall and by 8% excluding Online Distributors;
Middle East and Africa, which represented 7% of group sales, saw a 4% increase in sales overall. Excluding Online Distributors, sales declined by 4%.
Breaking it down by contributions per distribution channel, in summary, they clarified the following: Contribution to group sales of our directly operated boutiques was 52% overall. Online sales channel accounted for 14% of group sales. Wholesale sales stood at one third of group sales.
Jewelry and watches remain the group’s largest product lines, but each contributed to less than 40% of group sales compared to 39% and 43%, respectively, a year ago. Watch sales saw a high single-digit increase overall with good end client demand leading to strong retail sales.
“Performance was positive overall, though it was varied across Maisons, regions and channels. Vacheron Constantin, Roger Dubuis, Jaeger-LeCoultre, Lange & Söhne and Piaget all outperformed.”
“Sales of watches online have been progressing well from a small base, with collections from 6 of our 8 Specialist Watchmakers now available on MR PORTER and NET-A-PORTER websites.”
The times, they are clearly changing. The customers are better educated and distribution channels are turned upside down.
With all of this said, the chart of the past 6 months shows much the same as for the Swatch Group:
Correlation between both Groups is quite striking!
I think for the big groups especially, having to rethink distribution is the key challenge ahead (and making nice non limited edition watches too..)
Absolutely agree, 2019 is going to be a wild year in particular, so much change ahead.
That graph was inpsired by TheDutchMongolian’s comment/thought under the Swatch article from yesterday 🙂
Numbers aside – how good-looking is that Lange movement in that first picture?! Richard Lange Jumping Seconds? So so pretty
Also – thanks for the write-up!
Thanks for the stock comparison Sir! I may be wrong, but I feel Richemont may be a bit more diversified as a group given their non-watch division, Cartier, Montblanc, Van Cleef, vs. Swatch has only Harry Winston that I can think of? I think the production numbers and distribution channels has to be addressed by these big name groups. And how to fight the digital world and the new generation will be key.
The almost identical fluctuations in both graphs, at least since august, creates the suspicion we are talking about the same investors that are spreading their risks between at least these two luxury groups.
Could be explained by the increased size of index tracking funds and their tracking errors hence the correlation between the two firms
Interesting insight! They dance in a very similar / nearly identical pattern if you look on longer term, but not as similar as for the past 6 months it seems.