Shares in luxury goods company Richemont [JSE:CFR] slumped more than 5% on Friday after it posted its unaudited results for the six months ended September 30.
The group's shares opened at R100.65 on Friday morning, and were trading 5.50% weaker at R97.66 at midday.
While profit more than doubled to €2.3bn, the retailer said this was primarily due to a post-tax non-cash gain of €1.38bn on the revaluation of existing shares in online luxury retailer YOOX NET-A-PORTER, or YNAP. YNAP, which is owned by Richemont, delisted from Milan Stock Exchange in June.
During the six months Richemont also acquired premium pre-owned timepiece retailer Watchfinder, and divested from handbag company Lancel. "These strategic changes have had a material impact on our operating profit and net cash position in the period under review," Richemont chairperson Johann Rupert said.
YNAP and Watchfinder helped boost Richemont's sales 21% to €6.8bn. Excluding these businesses, sales for the period grew by 6%.
"Excluding online distributors, all regions with the exception of Middle East and Africa enjoyed higher sales, with notable double digit increases in Hong Kong, Korea and the USA," said Rupert.
The group's operating profit however was down 3% to €1.13bn, which Richemont said reflected an increase in costs which offset improvements in gross profit – which was up 16% to €4.3bn. The costs are attributed to the first-time consolidation of online distributors and their related acquisition charges, as well as disposal-related charges. Excluding the consolidation the operating margin improved by 21.1%.
Rupert said that the strategic partnership with Alibaba Group announced on October 26, 2018 would also help the retailer's effort to target Chinese consumers.
"YNAP and Alibaba will establish a joint venture to bring the in-season offerings of YNAP to Chinese consumers, be it in China or whilst travelling abroad. This new chapter in the history of Richemont reflects the potential we see in China and the confidence we have in Alibaba," he said.
The chairperson said the group was facing "growing volatility in consumer demand, partly attributable to an uncertain economic and geopolitical environment," but added the company is confident in its "ability to realise our long term ambitions."
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