Richemont Jumps on Better-than-Expected 1st Half Earnings, Partnership with Alibaba

By Olivia Bugault

Compagnie Financiere Richemont SA shares jumped on Friday after the Swiss luxury company released better-than-expected results in its first half and announced a partnership with Chinese giant Alibaba Group Holding Ltd. and fashion retail-platform Farfetch Ltd.

At 0853 GMT, shares of Richemont were up 9.3% at CHF69.44.

The Swiss luxury conglomerate, which owns jewelry brands like Cartier and Van Cleef & Arpels, posted an operating profit of 452 million euros ($534.7 million) for the period to Sept. 30. Net profit declined 82% to EUR159 million.

Operating profit and net income for the period were a strong beat driven by a solid performance at the Jewellery Maisons segment and tight cost control, Citi said.

Sales dropped 26% to EUR5.48 billion, with Richemont seeing positive trends in the second quarter after a sharp decline in the first three months of its fiscal year. Sales in China rose by 78% in the six months.

Strong growth in China helped contained the decline in Asia Pacific and also partly mitigated the drops in sales in Europe, Japan and the Americas, Bernstein said.

The luxury company also announced late Thursday that it was partnering with Alibaba and Farfetch to speed up the digitization of the luxury industry and improve access to the Chinese market. Under the partnership, Alibaba and Richemont will invest $250 million each in Farfetch China, and will therefore hold a combined 25% stake in a newly formed joint venture that will include Farfetch's marketplace operations in China. Alibaba and Richemont can decide to buy a further combined 24% of Farfetch China three years after the joint venture's formation, they said.

Citi says the deal is a major agreement and "highlights the formidable potential of the Chinese luxury market, which no one will obviously contest, but does not address the economics behind the transaction".

Write to Olivia Bugault at [e-mail]

(END) Dow Jones Newswires

November 06, 2020 04:17 ET (09:17 GMT)

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