Top jeweler's profit loses its sparkle

Cie Financiere Richemont SA, the world's largest jewelry maker, said full-year profit growth slowed after the dollar's drop and a weaker economy hurt US necklace and bracelet sales.

Net income rose 18 percent to 1.57 billion euros in the year through March, the Geneva-based owner of the Cartier brand said yesterday. That met the 1.56 billion-euro median estimate of nine analysts surveyed by Bloomberg. Earnings climbed 28 percent in the first half.

The dollar's drop against the euro is curbing Richemont's growth at the same time that US consumer spending is under pressure from increased living costs and confidence is slumping as house prices weaken. Tiffany & Co, the world's second-largest luxury-jewelry retailer, said last week it's "cautious" about the outlook for the country's economy.

"The weak dollar is bound to have had an impact," Dieter Buchholz, who helps manage about $100 billion at AIG Private Bank in Zurich, said before the figures were released. "Growth in emerging markets and the Middle East will counterbalance the western hemisphere, particularly the US."

The maker of Van Cleef & Arpels jewelry said yesterday it plans to split into two companies: a luxury business based in Switzerland and an investment company based in Luxembourg. Shareholders would receive shares in the investment company and would be able to receive part of Richemont's stake in British American Tobacco Plc directly, subject to regulators' approval.

Buyback plan

Richemont also said it will buy back as much as 1.7 percent of its share capital in the coming two years.

Richemont fell 1.25 Swiss francs, or 1.9 percent, to 64.85 francs in Zurich trading on Wednesday. The stock has dropped 17 percent this year, more than the 11 percent slide by Paris-based LVMH Moet Hennessy Louis Vuitton SA, which has a retail joint venture with De Beers, the world's biggest diamond company.

Annual sales rose 10 percent to 5.3 billion euros, Richemont, the maker of Mont Blanc pens and Purdey shotguns, has said. That was 2 percentage points less than in the prior year.

The euro on average was 10 percent higher against the dollar during Richemont's fiscal year compared with the prior period, data compiled by Bloomberg shows, eroding the value of US sales. The company gets a fifth of its revenue from the Americas and more than a quarter from the Asia-Pacific region, where many currencies are linked to the dollar.

Spending slowdown

Consumers in the United States, the world's biggest economy, have less to spend on luxury goods as higher living costs erode incomes. Sales climbed 21 percent at New York-based Tiffany's foreign shops in the three months through January, more than five times the 4 percent growth rate in the US.

First-quarter sales at Bulgari SpA, the world's third- biggest jeweler, fell 8.9 percent in the Americas, figures released last week shows. Exchange-rate movements reduced Japanese sales growth by more than half.

The spending slowdown also is hurting sales of watches, which had surged as more wealthy Chinese bought timepieces in Hong Kong to take advantage of lower taxes. Exports of Swiss watches rose just 0.5 percent in March, the least in three years, the national watchmaking federation has said. Shipments to the US fell 15 percent by value, the first decline in seven months.

Richemont was started in 1988 by South Africa's billionaire Rupert family to hold investments outside of the country during the apartheid era.

Agencies

(China Daily 05/23/2008 page16)