Richemont rules out divestments as growth picks up

Fri Nov 8, 2013 5:46am EST
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By Silke Koltrowitz

ZURICH (Reuters) - Luxury goods group Richemont CFR.VX has decided not to sell underperforming businesses such as leather goods maker Lancel in part because it couldn't get a good enough price, disappointing analysts' hopes for a quick solution.

Instead, the maker of Cartier jewelry and IWC watches said on Friday it hoped to turn around lagging businesses, which also include menswear brand Dunhill and Montblanc writing instruments, within two to three years.

The group also reported sales growth of 9 percent in the six months to September, in line with forecasts, and a pick-up to 12 percent growth in October, helped by some one-off sales of very expensive jewelry items.

At 0950 GMT, Richemont shares were down 1.8 percent at 91.3 Swiss francs, underperforming a 0.6 percent decline in Europe's blue-chip stocks index .FTEU3.

"Surprising, and likely to be taken negatively," said Citi analyst Thomas Chauvet of Richemont's decision to retain its weaker brands, which are mostly in fashion and accessories.

A string of consumer goods companies have struck deals recently to shed underperforming businesses in a bid to cope with a faltering global economy. Food group Nestle NESN.VX, for example, agreed on Thursday to sell the bulk of its struggling Jenny Craig weight-loss business.

Richemont's core jewelry and watch businesses, which account for 80 percent of sales, generated higher operating results in the half-year to September and boasted operating margins of 36.9 and 31.7 percent respectively.

At the same time, operating profit at Montblanc fell 55 percent and the margin halved to 6.7 percent. Its other businesses, including Lancel and Dunhill, had an operating loss of 35 million euros.   Continued...

Two men stand outside the Cartier store on Rodeo Drive in Beverly Hills, California, May 21, 2013. REUTERS/Fred Prouser