Especially in light of rarefied pricing and imperious distribution practice, some may wonder about MB's actual sales volume. A recent earnings report released by MB's Swiss parent, Richemont SA, sheds some light on this question.

While we can't quite shake out results for MB alone, we have traction on Richemont's group writing-instruments sales; this segment includes the pen brands of subsidiaries MB, Cartier, Dunhill and Montegrappa.

The Answer: Richemont's total global pen sales were about $1B last year; of said writing-instruments revenue, MB likely accounted for, say, 80-85% or more.

Overall, Richemont's luxury-goods operating profit was 21 percent, very snappy performance.

So, oil crisis and recession be damned; those "precious" $695 #149s and $7 RB refills are seductive. Got milk?

--BAM


WSJ--
Richemont Net Rises as China, Russia Lap Up Luxury
 
Cartier Owner Says BAT Spinoff Is On; Strategy Is a Bet on High-Priced Goods
 
By Stacy Meichtry
May 23, 2008
 
A surge in profit is giving Cie. Financière Richemont SA the financial firepower to push ahead with a spinoff of its cash-rich tobacco business, as the Swiss luxury group shrugs off the economic turmoil that is squeezing smaller rivals.
 
Geneva-based Richemont, the owner of Cartier and the world's second-largest luxury-goods group to LVMH Moët Hennessy Louis Vuitton SA, reported an 18% rise in net profit to €1.57 billion, or $2.48 billion, in the fiscal year ended March 31.
 
In perhaps the clearest sign of Richemont's confidence in the luxury industry's resilience, the group announced it is forging ahead with plans to spin off its 30% stake in British American Tobacco PLC, allowing shareholders to directly invest in BAT through a separate investment fund.
 
If completed, the move will transform Richemont into a pure luxury-goods group at a delicate time. Investors have been fretting over whether the luxury industry is strong enough to withstand spending slowdowns in the U.S. and Japan, which has pushed share prices down.
 
In an interview, group Executive Chairman Johann Rupert said he was "confident" that Richemont's luxury business will have sufficient growth prospects and liquidity without the tobacco business.
 
Richemont's profitability highlights a widening gap between large luxury conglomerates that have benefited from years of aggressive expansion in fast-growing emerging markets, and smaller rivals that have been slower off the mark.
 
In recent months, slower spending and weakened currencies in Japan and the U.S. have begun to eat away at the profits of luxury-goods makers, such as Rome-based Bulgari SpA, that remain reliant on traditional luxury markets for a large chunk of their sales.
 
Strong demand for pricey jewelry and watches in Russia and China, however, is driving sales at Richemont. The company said sales increased 10% to €5.3 billion for the fiscal year.
 
Mr. Rupert said he expected sales in China to surpass Japan by the end of the year. Excluding Japan, sales in Asia rose 21% to €1.29 billion for the fiscal year.
 
The BAT stake, which accounts for more than 40% of Richemont's market value, generates a steady revenue stream for the group, helping to insulate Richemont's bottom line from downturns in the luxury market. Cash dividends received from BAT last year totaled €325 million.
 
Operating profit from the group's luxury-goods business rose 21% to €1.11 billion in the fiscal year. The company also announced on Thursday a plan to buy back of up to 10 million class "A" shares, or 1.74% of its capital.
 
Richemont is negotiating over the structure of the new fund with BAT and stock-market regulators. Dividends from BAT are paid to a holding company in Luxembourg, where it benefits from special tax status.
 
A Richemont spokesman declined to give a timeline for the spinoff but said the company will complete the move before the end of 2010, when the tax privileges will expire. The group aims to list the new fund on the Luxembourg Stock Exchange, he added.
__
From accompanying graphic:
Richmont SA, Total FY 2008 Sales €5.3B ($8.32B)
Sales by Segment:
Jewelry 50%
Watches 26%
Writing Instruments 12% €636mm ($998.5mm)
Leather/Access. 6%
Other 6%

© 2008, Dow Jones

http://online.wsj.com/article/SB121144042740413723.html

Pen-Profitability FAQ

Q. What is meant by "Operating Profit?"

A. Operating profit measures earnings before interest, taxes and exceptional (that is, one-time, non-recurring) items or charges.

Said another way, operating profit is a firm's net sales revenue (sometimes called turnover), less the cost of goods sold and less selling, general and administrative expenses.

As reported by Richemont, sales revenue should refer to sales at the wholesale level, including sales to company-owned MB boutiques.

Q. So how profitable is a single pen?

Based on Richemont's results, one might reasonably render the following analysis:

Profitability of a MB 149--

$695.00 (US MSRP)

-$347.50 (Wholesale cost to authorized dealer or MB boutique using a 50% gross margin, but actual retailer GM could be lower and wholesale revenue to MB higher)

-$274.52 (MB mfg cost (~$35?), plus marketing/selling/distribution, general and admin expense; includes costs for cust service, warranty support, etc)

= $72.98 MB operating profit (21% of sales; avg across Richemont's luxury-goods segments, incl jewelry)

Thus, as an approximation, we can say that each new 149 might throw off to MB $73 before interest on borrowed capital, if any, and taxes are considered. This is a handsome result that would greatly exceed (perhaps by a factor of 2-3x) the operating profit outcome for an active indie retailer.

And it is this difference in outcome--MB's vs retailer's--that inspires discounting and trans-shipping on the street. The disparity fosters for retailers an urgency to generate profit margin *dollars* (volume) as a substitute for vanishing margin *percentage*.

--BAM

'A Tale of Two Cities:'

It's been reported that General Motors lost an average of $1,271 for every vehicle sold in the US and Canada in 2006. For that year's first half, GM's average vehicle selling price was $23,604.

In contrast, for every $23,604 worth of 149s recently sold by MB, Richemont's operating profit was about $4,957.

I really doubt that Montblanc has a 80-85% share of the global market share ?

sherm,

The 80-85% range refers only to MB's share of parent Richemont's global sales, not to its industry market-share. Along with MB, Richemont's luxury writing-instruments brands include Cartier, Dunhill and Montegrappa.

I've now edited the post for clarity; sorry for any confusion.

--BAM