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Richemont hit by currency issues and poor trading in Hong Kong and Macau

Luxury goods operator Richemont, owners of jeweller Cartier, saw its total sales slide 8% in April, signaling a poor start to its new trading year.

This was not what the market wanted to hear particularly as the business confirmed that net profits for 2014-15 had dropped 35.4% following on from last month’s warning that they would come in below estimates. That put total 2014/15 sales at 33 bn euros, or $1.69 bn.

April’s trading woes were mainly location specific. Sales in Asia, not including Japan, were down 20-25% proving that the Chineses crackdown on gifting is still impacting sales comparisons.

The brands’s high end jewellery businesses which include Van Cleef were particularly hit by a big slump in sales in Hong Kong and Macau. This together with currency issues set the business back considerably.

Shares were down to 85.35 Swiss francs, or $91.28, on early trading following the announcement.

The currency problem is illustrated all too clearly by April sales figures. April sales before currency issues were taken into effect had actually risen at the group by 9%, if calculated at actual exchange rates, but they were down 8 percent at constant ones.

Brokers were not expecting such a big hit.  Morgan Stanley stated the figures were “materially below expectations. It had expected Richemont’s April sales to come in somewhere between -2.5% and plus 4%.

In a statement, Richemont called the results “resilient, despite a difficult situation in Hong Kong and Macau, a demanding basis for comparison in Japan, and the generally volatile economic environment experienced by our customers and retail distribution partners.”

The company said all its jewellery brands and specialist watchmakers delivered sales growth and broadly maintained their operating margins through successful product launches and, in certain markets, price increases.

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