Richemont’s first-half earnings disappoint. The luxury goods group reported operating profit that missed expectations due

to the cost of acquisitions and disposals.

Richemont's shares fell to their lowest on a year and a half on Friday,

dropping as much as 6.7% after it reported first-half profit that missed

expectations.

The luxury goods group's online push has come at a cost after it consolidated

its new Online Distributors business and acquisition and disposal charges.

During the six months to end-September, it bought the remainder of online

retailer Yoox Net-a-Porter (YNAP) and watch specialist Watchfinder. It sold

Lancel.

The inclusion of 100% of YNAP and Watchfinder boosted sales by 21% "6.8

billion for the six months to end-September. Excluding Online Distributors,

sales grew by 6% at actual exchange rates and by 8% at constant exchange

rates, driven by its Jewellery Maisons and double-digit increases in the

Maisons' directly operated boutiques and online stores. All regions with the

exception of the Middle East and Africa reported higher sales, with double-

digit increases in Hong Kong, Korea and the US.

Operating profit declined 3% to "1.13 billion, missing expectations for a rise

to "1.3 billion. Its operating margin declined to 16.6%. Excluding Online

Distributors it improved to 21.1%.

Profit for the year rose to "2.25 billion, assisted by a post-tax non-cash

gain of "1.38 billion on the revaluation of existing shares in YNAP. Net cash

declined to "1.58 billion after a "3.75 billion cash outlook related to the

acquisition of YNAP and Watchfinder, as well as dividend payments.

Amidst growing volatility in consumer demand, partly attributable to an

uncertain economic and geopolitical environment, we maintain confidence in our

ability to realise our long-term ambitions, supported by the strength of our

balance sheet," chairman Johann Rupert said. "so it stands out better."

Last month, Richemont announced a joint venture with Chinese online retail

giant Alibaba that will target YNAP's products at Chinese consumers.

Its shares closed 6.4% down at 96.78 rand on Friday.

Richemont: PE is around 18.4x. Probably the cheapest it has been since 2009.

I just have a bad feeling about this online caper, but there again my tech

savvy is zero. (PE calculates to 17.7x if is cash removed, but this is

becoming a lot less relevant.)

-- Karin Richards (@Richards_Karin) November 9, 2018

Serious miss by CFR with operating profit expected to be 1.3 and coming in

at 1.13 billion. Operating margin dropping from 19% to 16.6%. With these

luxury stocks being hammered on misses lately as China future not looking so

good , can't see this not being hammered.

-- Daniel Airey (@DanielAirey) November 9, 2018

Richemont technical update on long term chart on the back of earnings - now

looks to be firmly below the 103/104 level. GM and OM -310bps & 400bps

respectively. Needs to hold 90.60 rand or 78.54 rand opens up as a new target. Long

term triple top still looks to be in play. pic.twitter.com/59bgvMqtoI

-- Lester Davids (@Davids) November 9, 2018