Richemont Sales Rise as Russians, Chinese Buy Watches

Cie. Financiere Richemont AG, the world's second-biggest luxury-goods company, said first-quarter revenue rose 9.1 percent as Russian and Chinese shoppers bought Mont Blanc and Piaget watches costing as much as $2 million.

Sales climbed to 1.27 billion euros ($1.8 billion) in the three months through June from 1.16 billion euros a year earlier, the Geneva-based company said today on its Web site. Revenue growth excluding currency movements matched the 15 percent median estimate of seven analysts surveyed by Bloomberg.

Richemont, the maker of Jaeger-LeCoultre and IWC watches, has benefited from increased demand for the priciest timepieces. Swiss exports of watches worth more than 3,000 Swiss francs ($2,500) rose 27 percent last year, compared with 17 percent growth for models costing more than 1,500 francs. Some clients must wait as long as a year for delivery because of the number of orders.

``This outcome is encouraging for the rest of the year,'' Constanza Mardones, an analyst at Citigroup in London with a ``buy'' recommendation on the company's shares, said of the figures. There's ``no sign of a slowdown'' in Asia, she said.

Richemont shares fell 40 centimes, or 0.5 percent, to 77.1 Swiss francs in Zurich, rebounding from an earlier drop of as much as 2.6 percent. The stock had slid after sales gains including currencies missed the survey's 10 percent median estimate because of declines by the dollar and yen that wiped 6 percent from revenue growth.

A Third of Revenue

``The foreign-exchange impact was a bit stronger than expected,'' said Urs Diethelm, an analyst at Bank Sal. Oppenheim Jr. & Cie. in Zurich with a ``buy'' rating on Richemont stock.

The luxury-goods maker gets about a third of revenue from the Americas and Japan, leaving it vulnerable to declines by the dollar and yen against the euro. The yen on average was 12 percent lower against the single european curency in the quarter compared with a year earlier, and the dollar was 6.7 percent lower.

Premium watches generate about half of sales at Richemont, the maker of Purdey shotguns, according to Yasuhiro Yamaguchi, an analyst at UBS AG in London who rates the stock ``buy.'' The company announced quarterly sales for the first time today, rather than just revenue growth, because of new regulations requiring more financial disclosure.

Russians are spending more money on luxury goods as the country's economy expands for a ninth year in a row, stoked by higher energy and metals prices. The government probably will raise its forecast for this year's growth to 7 percent from 6.5 percent, Economy Minister German Gref said in June. Clothier Polo Ralph Lauren Corp. opened its first Moscow stores in May.

`Booming' Exports

``Swiss watch exports to Russia are booming this year,'' Rene Weber, an analyst at Bank Vontobel in Zurich who gives Richemont an ``outperform'' rating, said before the figures were released. ``Russians are increasingly buying more expensive watches.''

First-quarter sales rose 18 percent to 367 million euros at Richemont's watch unit, whose products include diamond-encrusted Piaget timepieces costing as much as $2 million. Excluding currencies, revenue advanced 24 percent.

Sales gained 6 percent to 638 million euros at the company's jewelry division, its largest by revenue. Declines by the dollar and yen cut sales growth by half. Revenue advanced 9 percent at the company's pen-making subsidiary and gained 2 percent at its leather-goods and accessories unit.

Sales in Japan fell 7 percent when calculated in euros and advanced 5 percent in yen. Revenue rose 10 percent in the Americas in dollars and gained 3 percent in euros. Sales advanced 20 percent in Asia outside Japan and 28 percent excluding currencies. Revenue climbed 13 percent in Europe.

Chief Executive Officer Norbert Platt said May 24 he didn't expect the yen or dollar to strengthen significantly in coming weeks or months. Richemont can't offset the currency effect entirely by raising prices because that would damage its brands, he said.