Luxury goods lose glitter

Watchmaker IWC is one of the brands owned by luxury concern Richemont Keystone Archive

The Richemont luxury goods group, based in Zug, has forecast a "significant" decline in operating profit for the second half of its financial year.

Richemont, the name behind such brands as Cartier, Van Cleef and Arpels, Dunhill and Montblanc, said operating profit fell to €253 million (SFr372.67 million), on sales of €1.836 billion (+10 per cent).

Richemont had a 21 per cent plunge in the first half of the year.

Profit after taxation fell to €165 million from €227 million for the comparable period the previous year. Group net profit includes a €260 million contribution from the group’s 21.1 per cent stake in British american Tobacco, the world’s second largest tobacco group.

Richemont, whose financial year runs to the end of March, said in a statement on Thursday that sales reflected the depressed economic environment.

Drop in demand

“Since October of last year, the luxury goods industry has experienced a slowdown in demand. In recent months this trend has been exacerbated, reflecting the worsening economic situation in the United States, Europe and Asia,” commented company CEO Johann Rupert.

“The events of September 11 have clearly had a significant negative impact on the economic climate and the mood of all consumers. The outlook for the second half of the current year is therefore not promising,” he added.

Richemont said sales in October were some eight per cent below last year’s level and it did not expect to see “any meaningful improvement” in the critical pre-Christmas season.

The group had warned last month that first-half operating income would decline due to a surge in expenses to boost its distribution network. However, it stressed that its strong balance sheet gave it protection to weather the storm.

In its latest statement, Richemont said that its long-term commitment to the development of its businesses remained unchanged.

“Significant investment programmes have been launched to consolidate the group’s position as a leader in the luxury watch industry, the statement commented.

Piaget, Cartier production

In Switzerland, the new Piaget factory in Geneva is now in full production and the production of the third Cartier production facility in the canton of Fribourg is well advanced, it added.

In other measures, detailed design and planning work continues for the new Vacheron Constantin headquarters and production centre in Geneva, whilst land has been acquired for a significant expansion of Jaeger-LeCoultre’s factory at Le Sentier in the Vallée de Joux.

Prodcution capacity at the International Watch Company (IWC) in Schaffhausen is also to be further expanded.

CEO Rupert said that Richemont’s businesses were able to weather the current difficulties, having survived various slowdowns during the course of their respective histories.

“Their focus on products of enduring value in terms of jewellery, watches and writing instruments, together with the geographic balance of the group’s sales, add to their strength, Rupert said.

swissinfo with agencies