Richemont H1 sales rise 17%, but gold costs weigh on underlying gross margin

Investing.com — Richemont’s (SIX:CFR) first-half operating profit rose 33% to €3.13 billion, but nearly a third of the increase came from a €229 million tariff-related one-off, while higher gold costs weighed on underlying gross margins despite strong jewellery sales, the Cartier owner said on Friday.

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Excluding the one-off, operating profit was €2.9 billion. Operating profit rose 38% at constant exchange rates, with the operating margin increasing to 25.5% from 22.2% a year earlier, or 23.6% excluding the one-off.

Gross profit increased 18% to €8.17 billion, while the gross margin rose to 66.5% from 65.3%. The one-off contributed 190 basis points to the margin; excluding it, the margin fell 70 basis points.

Higher production costs, largely driven by raw material prices, notably gold, were mostly offset by price increases over the past year and a more favourable sales mix.

Sales rose 17% at constant exchange rates and 16% at actual rates to €12.28 billion. Growth slowed to 13% in the second quarter from 20% in the first quarter, and compared with 14% growth in the year-earlier period.

Jewellery sales increased 19% at constant exchange rates to €9.15 billion, with second-quarter growth slowing to 14% from 17% a year earlier, as demand for jewellery and watch collections remained strong. Segment operating profit was €3.23 billion, representing a margin of 35.3%, or 33.4% excluding the one-off.

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Sales at specialist watchmakers rose 10% at constant exchange rates to €1.71 billion, with second-quarter growth of 12%. Operating profit increased to €150 million from €50 million a year earlier.

The Other division reported a 9% increase in sales to €1.43 billion and an operating loss of €12 million, compared with a loss of €42 million a year earlier.

By region, sales rose 23% in the Americas, 30% in Japan, 16% in Asia Pacific and 13% in Europe at constant exchange rates. Sales fell 2% in the Middle East and Africa, including a 7% decline in the second quarter, as the conflict in the region sharply reduced tourist spending, particularly in the United Arab Emirates.