Cartier-Parent Richemont Warns on Profit After Slide in Sales
September 14 2016 - 2:54AM
Dow Jones News
By Brian Blackstone
ZURICH-Swiss luxury giant Cie. Financière Richemont SA (CFR.EB)
on Wednesday said sales tumbled in the five months through August
and warned that profit will be down sharply, reflecting the
challenges facing luxury-goods companies from weaker demand in Asia
and a decline in tourism in Europe.
The Geneva-based owner of Cartier jewelry said sales fell 14%
for the five months through August from the previous year at actual
exchange rates. At constant exchange rates, sales fell 13%.
The company also said it expects operating profit for the six
months through September to be down around 45% from the previous
year.
"We are of the view that the current negative environment as a
whole is unlikely to reverse in the short term," the company
said.
The results came weeks after Swatch Group AG reported a 52%
plunge in first-half profit. Net sales at the company, known for
its cheap plastic watches but also the owner of expensive brands
such as Omega, Blancpain and Breguet, fell 11%.
Watch makers and other luxury good companies have been hit by a
series of shocks in recent years: weaker global growth that
depresses incomes; anti-corruption drives in China; terrorism fears
in shopping hubs such as Paris that have hurt tourism; and new
entrants into the market, particularly makers of smart watches.
Richemont said that sales were down in much of Europe,
"particularly in France, due to a significantly lower level of
tourist activity."
In Asia, sales growth in mainland China and Korea "was more than
offset by the continuing weakness of the Hong Kong and Macau
markets," where the company is buying back inventory, Richemont
said. Japan showed sharply lower sales in part due to the strong
yen which hurt tourism there.
Sales also fell in the Americas, but at a slower rate than in
other regions. They grew in the U.K. after the referendum to leave
the European Union, which weakened the pound.
Richemont maintained an upbeat view about the long-term
prospects for the luxury goods industry. The company "is well
positioned," it said, citing a strong balance sheet and its
well-known brands.
Write to Brian Blackstone at brian.blackstone@wsj.com
(END) Dow Jones Newswires
September 14, 2016 02:39 ET (06:39 GMT)
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