Richemont cuts dividend as Covid-19 hits sales


Richemont cuts dividend as Covid-19 hits sales

Published Date: 2020-05-18 | Source: Stephen Gunnion | Author: Stephen Gunnion

Richemont cuts dividend as Covid-19 hits sales

The luxury goods group is investigating a scheme to reward shareholders after halving its 2020 dividend to preserve cash.

Richemont says fourth-quarter sales sank 18% as the world's rich spent less on expensive jewellery and watches. The luxury goods group has halved its annual dividend to preserve cash.

Releasing the group's annual results, chairman Johann Rupert said the luxury industry was dependent on customers' willingness to spend and had benefited from increased international travel in recent years. Headwinds would continue in the months ahead.

Richemont, which owns brands that include Cartier, Dunhill and Chloé, said sales in China fell by two-thirds in the three months to end-March, while the Asia Pacific region recorded a 36% decline. In Europe, sales decreased by 9%, while they rose by 9% in the Americas.

For the year as a whole, group sales rose 2% to €14.2 billion and were flat at constant exchange rates. Growth was driven by its Online Distributors and Jewellery Maisons division, with good performances in the Americas, Europe and Japan more than offsetting a decline in Asia Pacific.

Operating profit declined by 22% to €1.52 billion. Net profit slumped 69% to €931 million but excluding a large once-off gain of €1.38 billion booked the previous year it was down 34%. It's cut its dividend to 1 Swiss franc from 2 francs last year. The group said it ended the period with a net cash of €2.4 billion

The company said there was very limited visibility as to what the year ahead held. However, it said there were signs of improvement in its business, with strong demand since its 462 boutiques in China reopened following lockdown conditions. It was also shifting from a fixed cost basis of operating to a more flexible model, including online marketing and said its joint venture with Alibaba in China and its initial online 'Pavilions'' were introducing Cartier and other Maisons to a new generation of shoppers.

Richemont said it was looking at the potential to provide shareholders with some additional form of reward to compensate in part for the reduction in the cash dividend per share. Such a 'loyalty bonus' could potentially take the form of the distribution to shareholders of an instrument entitling them to acquire further shares on advantageous terms. It expected to make a further announcement ahead of its annual general meeting.

Richemont's shares closed 1.3% down at R98.06 on Friday.

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