Richemont Group Loses Confidence In Fashion Department

Compared with some luxury brands, which continue to engage with the fashion industry a lot, Richemont, which has many top brands, seems to be intentionally changing its current development strategy. The group began to lose confidence in the fashion department, while the jewellery and watch department had more room for development.
According to media reports, Johann Rupert, chairman of Richemont’s board of directors, said the group should get rid of those disappointing brands as soon as possible. A series of related events began to lean on Richemont Group or plans to clean up the fashion brand. Less than a week after Richemont’s financial report was released, Richemont announced the departure of Martha Wikstrom, CEO of the fashion accessories division, and Eraldo Poletto, the former CEO of Alfred Dunhill, who had just left for the first half of the year.

Xuesheng Wen, a senior researcher at CIC Consulting, told a reporter from Daily Economic News that judging from the changes in Richemont’s senior management, the company may organize its fashion and accessories business to a certain extent.
Losing confidence in the fashion sector
It is understood that Richemont appointed former department store industry Nordstrom Inc. and Harrods executives Martha Wikstrom to head the group’s fashion department in 2009, but fashion brands have not seen improvement for several years. Chloé has been shaky since Phoebe Philo left Chloé in 2006.
In 1997, Richemont bought Lancel for 342 million Swiss francs (approximately $ 352 million). According to the financial report in the middle of this month, Lancel’s revenue was only flat with the previous year.
Kepler Cheuvreux analyst JonCox said Richemont’s impatience with the fashion department was clearly seen on the earnings call and Martha Wikstrom’s departure may be due to the group’s unwillingness to invest in fashion brands. JohnGuy, an analyst at Berenberg Institution in London, said that in the last fiscal year, Lancel, Chloé and Alfred Dunhill have been in a downturn, while competitors have outperformed the market, so the group no longer has confidence in these brands.
Xue Shengwen believes that in the fashion and accessories business, competitors have performed better, but Richemont-related brands have been in a downturn for a long time, which has made management lose confidence in the future growth of the fashion and accessories business and the establishment of market competitiveness .
‘It can be said that Richemont Group has a very different attitude towards Lancel and Alfred Dunhill in terms of promotion. Apart from opening stores, Lancel has almost no marketing in China; Alfred Dunhill is the opposite situation. This brand has expanded too much in the Chinese market. The market channels have been spread too extensively, and as a result, its entire brand image has gone down. ‘Said Zhou Ting, a luxury expert and dean of the Fortune Quality Institute.

Want to deal with bad investments as soon as possible
During the first quarter earnings report and analyst conference call on May 16, Johann Rupert told analysts that although the group focuses on the development of jewelry and watch brands, it does not intend to promote it through investment. Instead, it uses ideas, craftsmanship and exclusive products to competition.
Johann Rupert said that the acquisitions made by the group are not always successful, so bad investments must be dealt with faster. He also emphasized that ‘maybe’ but ‘should’. But Martha Wikstrom quickly pointed out that ‘junk’ is not just a fashion and accessories brand.
Xue Shengwen said that for Richemont Group, the performance of its fashion and accessories business is not satisfactory. Although the company’s earnings are profitable due to exchange rate relations, excluding the impact of the exchange rate on the company’s overall performance is not optimistic. The company intends to sell its fashion and accessories business in order to focus on profitable and advantageous businesses.
Zhou Ting believes that, on the one hand, the market differentiation and profit space make Richemont need to further develop its better top and niche brands; on the other hand, in terms of categories, the group does not have the main leather goods Brands and apparel brands, fashion and accessories do not have a strong advantage.
Jewellery and watch development space is not small
According to Richemont Group’s fiscal 2013 financial report, the Group’s total sales increased by 14% year-on-year to 10.15 billion euros, operating profit was 2.426 billion euros, an increase of 18% over the previous fiscal year, and net profit was 2.05 billion euros, higher than the market Expected 1.96 billion euros.
From the perspective of product categories, Richemont Jewellery Group’s sales in FY2013 increased by 13% to 5.206 billion euros. Cartier and Van Cleef & Arpels performed well, especially the strong demand for Cartier watch series. The watch division’s annual sales were 2.752 billion euros, an increase of 18% over last year’s 2.323 billion euros. Operating profit was 733 million euros. The operating margin was 26.6%, which was 340 basis points more than last year’s 23.2. Other divisions include fashion accessories business, e-commerce Net-a-Porter and watch parts manufacturing business, with sales of 1.426 billion euros last year, an increase of 16% over last year’s 1.232 billion euros.
In this regard, Xue Shengwen said that the performance of the Richemont Group’s various businesses has clearly differentiated.
‘Compared with the Swatch Group, Richemont Group is easier to control high-end brands. Although the current luxury environment is not particularly good, there is still a lot of room for jewelry watches.’ Zhou Ting added.