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Richemont profit misses estimates as online acquisitions weigh

May 17 2019 09:10
Corinne Gretler, Bloomberg

Pedestrians look at the window display of a Cartier luxury store, a unit of Richemont SA, in Prague, Czech Republic. (Martin Divisek, Bloomberg)

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Richemont [JSE:CFR] reported full-year operating profit that trailed analysts’ estimates as the company consolidated its acquisitions of online platforms YNAP and Watchfinder.

Earnings climbed 5% to €1.94bn in the 12 months through March. Analysts expected €2.05bn. The operating margin slipped to 13.9%, the lowest in more than a decade.

These results show how much of a bet Richemont is making on e-commerce. Last year’s purchases of YNAP and Watchfinder have boosted sales but eroded profitability.

Excluding those units and other one-time costs, operating profit would have increased 13%. Investors may be disappointed that Richemont didn’t give many more details on YNAP’s joint venture with Chinese online retailer Alibaba. The company merely said it’s progressing.

Richemont’s double-digit growth in mainland China and Hong Kong will reassure investors. The results come a day after Burberry Group Plc reported disappointing sales growth from that market.

Richemont shares have climbed 16% so far this year. The stock slumped 29% last year, the worst performance in a decade.

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