EU CONSUMER CYCLICALS: Richemont | 4Q Results
(CFRVX; NR/A+) (equiteis +7%)
4Q sales across US/Europe remained firm, lingering weakness in APAC despite rolling over falls from last year now. Asia falls will look lacklustre vs. Chinese competitors like this one {6181 HK Equity} - whose sales are trending exponentially. It was asked about it and humbly responded that it was "a fantastic example of a new Chinese brand that's very much rooted in Chinese culture, has also integrated and understood some of the codes of international luxury and is developing a very, very unique and differentiated offer". On the sizeable cash position no indications that will change rapidly "you know what, three or four years ago, everybody complained about lazy balance sheets. Today, it gives you a feeling of warmth and comfort. And our bonds now have a, what, 2% positive carry." 7Y trades inside new LVMH 32s - we see no issue with that.
- 3m to March sales +11% net of FX +8%. Left FY sales at €21.4b, +4% y/y (FX flat)
- ex. FX: APAC (1/3 group) -7% (FY-13%) with some offset from Japan (10% of group) +22% (FY+30%). Firm growth continued elsewhere: Americas +16%, Europe +13% (FY: 15%/+11%).
- Jewellery (90%+ of bottom line) +11% (FY +8%). Specialist watchmakers (15%) stayed weak -11% (FY -13%)
- FY gross margin at 66.9% (-120bps), most of that on rising material costs, only offset somewhat by pricing.
- Opex up +7%, dragging FY EBIT down by the same amount to €4.5b. On a 21.5% margin (-180bps) with another 60bp headwind from FX (total -240bps).
- FCF at €4.7b (LY €4.4b) despite higher Capex of €1.2b (+16%)
- Dividend bumped by +9% to €3/share (~€1.6b)
- €8.3b net cash position, up €0.8b y/y. Gross leverage little changed at 1.8x.
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AUSTRALIA: Neither Albanese Or Dutton Land Knockout Blow In Second Debate
The second leaders' debate ahead of the 3 May general election has concluded, with neither PM Anthony Albanese or Leader of the Opposition Peter Dutton landing a knockout blow. As MNI noted yesterday (see 'AUSTRALIA: ALP Bolsters Lead In 2PPV Polling Ahead Of 16 April Leaders' Debate', 1700BST), Albanese's centre-left Australian Labor Party (ALP) has recorded an increase in support in recent weeks that puts it in pole position to win a second three-year term in office, with Dutton's centre-right Liberal/National party coalition falling behind in the two-party-preferred-vote polls (crucial given Australia's electoral system).
- Political betting markets have shifted in line with opinion polling. On 28 March, when the election was officially called, data from Polymarket showed bettors giving Albanese a 51% implied probability of being the next PM, essentially a dead heat with Dutton. This has now shifted to a 79%-21% advantage in Albanese's favour.
- A significant portion of the debate focused on foreign policy, with both leaders asked about whether they trust US President Donald Trump and Chinese President Xi Jinping respectively. To both questions Albanese said he had "no reason not to", while Dutton demurred, saying he had not met them personally.
- Dutton was forced into a U-turn, acknowledging he had "made a mistake" in claiming that Indonesian President Prabowo Subianto had announced Russia would be given access to an airbase in the eastern province of Papua. Defence journal Janes had reported that Indonesia had received a request, but no statement from Prabowo was forthcoming. Albanese argued Dutton's initial accusations were “extraordinary” and said they showed he had “no understanding of the need for diplomacy”
Chart 1. Political Betting Market, Implied Probability of Next Australian PM, %
Source: Polymarket
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FOREX: GBPUSD Extends Rally Following Daily Close Above 1.32
- Despite GBP relatively underperforming some of its G10 peers Wednesday, the broad dollar weakness has helped GBPUSD extend its most recent rally. Spot has breached key resistance and the bull trigger at 1.3207, and yesterday’s close was the first above 1.32 since early October last year.
- This dynamic highlights a resumption of the medium-term uptrend and a positive close today would extend the pair’s winning streak to 7 consecutive sessions. Gains in that period currently total 4.32%.
- Price action has narrowed the gap to an initial target of 1.3305, the Oct 2 ‘24 high. Above here, key resistance comes in at 1.3434, the Sep 26 ‘24 high.
- MUFG expect GBP to continue to underperform EUR as the dollar weakens but quicker than expected progress on a US-UK trade deal would help to quickly reduce that underperformance. ING echo this view, highlighting the big EUR/USD bull trend suggests EUR/GBP can find some support near 0.85 and a reversal back to 0.86 is likely over the coming months.
- Regarding next week, we have several UK speakers which includes BOE Governor Bailey speaking at the Institute of International Finance, in Washington DC. Additionally, the gilt remit will be revised next week.
