Richemont reports low sales

January 19, 2009
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, ZURICH, January 19 – Luxury goods giant Richemont, owner of prestige brands such as Cartier and Montblanc, said on Monday that demand fell "dramatically" during the final quarter of 2008 in the toughest market conditions seen in the group\’s 20-year history.

The Swiss-based group reported turnover of 1.55 billion euros for the third quarter of its 2008 to 2009 financial year, a decline of 12 percent compared to the same period the previous year at constant exchange rates.

"Demand for luxury goods, as in other sectors of the economy, has fallen dramatically and Richemont is currently facing the toughest market conditions since its formation 20 years ago," the company said in an interim financial statement.

At actual exchange rates, the decline in turnover for the three months to December 2008 was 7.0 percent, it added.

All regions reported lower underlying sales, although in the Asia-Pacific region and Japan positive exchange rate changes yielded modest growth on accounts.

Richemont said the overall decline worsened over the period, especially in the United States where sales fell by 24 percent compared to the same quarter the previous year.

The luxury goods group saw "no cause for optimism" in the current economic climate and highlighted the uncertainties of the situation.

"We must assume that there will be no significant recovery in the foreseeable future and plan accordingly to cope with this situation," it added.

Richemont said its conservative management through the earlier financial crisis had helped maintain a strong balance sheet.

Last September, the group reported that the top end of the market was proving resilient to the financial crisis as sales rose by 11 percent over a five month period. But it had warned that it was not immune from a slowdown.

Richemont owns a host of luxury jewellery, watch and fashion accessory brands, including Cartier, Van Cleef & Arpels, Piaget, IWC, Baume & Mercier, Vacheron Constantin, Montblanc, Alfred Dunhill and Lancel.

Local authorities in the Swiss canton of Fribourg said Monday that 160 out of 200 staff at a Cartier plant there would be placed on temporary part-time work for three months from February, the Swiss news agency ATS reported.

Richemont was unavailable for immediate comment on the report.

Richemont Group also manages substantial financial interests, notably an investment in British American Tobacco (BAT).

Late last year, it carried out longstanding plans to separate the two parts of its business, creating Reinet Investments SCA to trade independently as the Group\’s dedicated investment vehicle.

On Monday, the group owned by the South African Rupert family underlined the extent of its fears in recent years about global financial stability and "wrongly priced credit," saying the world of finance had taken on "unknown and unquantifiable risks."

Striking an unusually critical note, the usually discreet luxury goods firm blamed "many activist shareholders and investment bankers" for generating excess leverage that "now has to be unwound with panic measures and unseemly haste."

Richemont\’s share price was down by 3.9 percent at 16.88 Swiss francs in late morning trading (1042 GMT) on the Swiss stock exchange.

Analysts at Wegelin Bank termed the outlook on the sector "disappointing" even though the company was amongst those well-equipped to weather the economic climate.

"The crisis now appears to have definitely arrived among luxury goods producers, and hopes that this sector could still be spared are now dashed," the private bank\’s analysts said in a market report.

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