Richemont shares soar as HY results beat estimates despite YNAP sale charge

By Scott Kanowsky 

Investing.com -- Shares in Cartier-owner Compagnie Financiere Richemont SA (SIX:CFR) jumped sharply on Friday after the Swiss luxury house posted better-than-expected second-quarter sales and first-half operating profit.

Sales during the July to September period surged by 19% at constant currencies to €5.02 billion (€1 = $1.0259), fueled in part by strong performance in Europe, where demand grew from North American and Middle Eastern tourists taking advantage of a recent slide in the value of the euro.

Quarterly revenue topped analysts' forecasts for growth of 9%.

The firm's key Jewellery Maisons and Specialists Watchmakers divisions also beat sales estimates, increasing by 21% and 16%, respectively.

However, store closures due to strict COVID-19 lockdowns in mainland China weighed on revenue in the Asia Pacific region.

First-half profit from continuing operations rose by 40% year-on-year to €2.1B, 15% above consensus estimates.

"Richemont delivered materially better-than-expected sales and operating profit performance in 1H23, which may lead to mid- to high single-digit percentage consensus [earnings before interest and taxes] upgrades for FY23 at first glance," analysts at Stifel said in a note.

Richemont Chairman Johann Rupert hailed the results as "strong," but warned of uncertainty in the economic and political outlook in Europe and other major markets for the business. He added that the group will "likely face volatile times ahead" as central banks raise interest rates to rein in inflation and national governments aim to curb cost-of-living pressures.

Meanwhile, as it previously flagged in August, Richemont was hit by a €2.7B charge stemming from its sale of ailing ecommerce business Yoox Net-a-Porter to online peer Farfetch (NYSE:FTCH) and Emirati investor Mohamed Alabbar.

When accounting for this impact and the half-year performance of YNAP, the firm behind high-end brands like Van Cleef&Arpels and Mont Blanc posted a loss of €766M for the six-month period ended on September 30, down from a profit of just over €1.2B during the same timeframe last year.

Rupert defended the move to offload YNAP, saying it will "realize my long-standing goal of making [it] a neutral industry-wide platform, with no controlling shareholder." Richemont had also faced pressure from some activist investors to sell the lossmaking YNAP.

"All in all, sequential growth acceleration and strong profitability should reassure investors, who do not need to worry about the YNAP drag to the equity story going forward," the Stifel analysts said.