Billionare Johann Rupert’s business is buying back multi-million rand watches in a fight against the grey market

JSE-listed luxury goods retailer Compagnie Financière Richemont said on Friday that an improved macroeconomic environment, steady progress on its transformation agenda and a mixed currency environment marked the financial year under review.

Sales increased by 3% at actual rates and by 8% at constant rates to 10.98 billion euro, driven by high single digit growth in retail and double digit growth in Asia Pacific, with particular strength in our main markets, namely China, Hong Kong, Korea and Macau. Strong overall retail performance reflected solid jewellery and watch sales, the company said.

Billionaires founder and chairman of the group, Johann Rupert, said that over the period, “we implemented further inventory buy-backs and strengthened the approach to managing sell-in versus sell-out at our multi-brand retail partners”.

According to the Financial Times, Richemont has been among the most aggressive watchmakers in withdrawing stock from the market “to help retailers deal with excess inventory”.

The group previously bought back stock in Hong Kong, its most important market for Swiss watchmakers, and on Friday, it also reported inventory buybacks in Europe to the tune of €203 million, from €278 million previously.

That held back operating profit, which rose 5%, less than analysts expected. The increase would have been 10% excluding the buybacks, Bloomberg reported.

Unsold watches pose a risk for luxury-goods makers, as they often enter the so-called “grey market” of unauthorized resellers, who offer discounts and erode pricing power, it said.

“An improvement in gross profit and tight cost control led to a 5% increase in operating profit. Excluding the one-time items in this year and the prior year, operating profit for the year would have increased by 10%,” Rupert said.

“Another really messy set of results following a larger-than-expected round of watch inventory buybacks,” Zuzanna Pusz, an analyst at Berenberg, wrote in a note. She said the market had expected 125 million euros. The stock fell as much as 7% in early trading, the steepest intraday decline in three years.

Bloomberg said that following a multiyear slowdown, the company’s watch offerings now include models at prices Richemont never offered before, such as the $560 Baume watch unveiled this week.

Richemont operates in three segments: Jewellery Maisons, being Cartier and Van Cleef and Arpels and Giampiero Bodino; Specialist Watchmakers, being A. Lange and Söhne, Baume and Mercier, IWC Schaffhausen, Jaeger-LeCoultre, Officine Panerai, Piaget, Roger Dubuis and Vacheron Constantin; and other, including Alfred Dunhill, Chloé, and Montblanc as well as watch component manufacturing activities.

Watches under its more recognised brand, Cartier, start at around the $4,000 mark, going up to nearly $400,000, with the Rotonde de Cartier Minute Repeater Flying Tourbillon, set in 18K pink gold case, costing $374,000.

The watch has a beaded crown “set with a sapphire cabochon, white galvanised guilloché dial, silvered openwork grid with sunray effect and black transferred Roman numerals, blued-steel sword-shaped hands”.

It also comes with a brown alligator-skin strap with double adjustable 18K pink gold folding buckle, and it water-resistant to 3 bar (30 meters/100 feet).

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Billionare Johann Rupert’s business is buying back multi-million rand watches in a fight against the grey market