Gross profit increased by 3 percent despite currency headwinds. The gross margin percentage was 60 basis points higher at 64.5 percent of sales. Operating expenses increased at a faster rate than sales revenue, and the operating margin decreased by 160 basis points to 24.1 percent in the six-month period. Profit for the period decreased by 23 percent and earnings per share decreased by 24 percent.
“Richemont results for the first half were fairly resilient overall, given the volatility of the environment that affected our clients and retailer partners in all regions, with the notable exceptions of the Americas and Middle East. Worth highlighting is the resilience of the jewellery category where sales rose by 10 percent at constant exchange rates. In this difficult environment, the Group's Maisons benefited from successful product launches and, in certain markets, price increases,” opined Johann Rupert, Chairman of the company.
Europe accounted for 39 percent of overall sales. Sales growth in the region moderated to 6 percent, reflecting the strength of the euro, cautious sentiment among retail partners, fewer tourists but resilient domestic demand. Markets in the Middle East and Africa continued to report strong double-digit growth. Sales in the Asia Pacific region accounted for 38 percent of the group total, with Hong Kong and mainland China the two largest markets. The Americas region, which accounted for 16 percent of group sales, continued to report strong domestic demand across all segments and product categories. In Japan, prudent consumer sentiment and a surge in purchases in March 2014 ahead of a sales tax increase combined to dampen sales in the April to September period.
Retail sales, comprising directly operated boutiques and Net-a-Porter, increased by 4 percent. With 53 percent of group sales, retail sales growth continues to exceed the growth in wholesale sales. The growth in retail sales partly reflected the addition of 43 internal boutiques, which reached 1 099 stores, as well as the continuing positive development of Net-a-Porter’s e-commerce businesses. The group’s wholesale business, including sales to franchise partners, reported flat sales. Sales at the jewellery maisons – Cartier and Van Cleef & Arpels – grew by 1 percent. Overall demand for jewellery was good, but demand for Cartier’s watch collections was weak. The increase in reported operating losses reflected the performances at Alfred Dunhill and Lancel, partly offset by reduced losses at the Group’s watch component manufacturing facilities. The Richemont 2014 interim report will be published on November 14, 2014.