A watch industry in crisis, demands of the digital era and the changing habits of the Chinese consumer have forced luxury behemoth Compagnie Financière Richemont to think in a new way — and make some draconian changes.Earlier this year, it took the big step of selling an old fixture in its portfolio, Shanghai Tang, to the Italian entrepreneur Alessandro Bastagli and the investment company Luxcite.Analysts applauded the move, saying Richemont was brave to start culling its holdings, although no more disposals are expected soon.Thomas Chauvet, senior equity analyst at Citi, said Richemont is continuing to adjust the business model to the “new normal” of the market and to the rapidly changing consumer behavior and attitudes.“This decision shows that [chairman and owner Johann Rupert] is very pragmatic and very hands-on. Richemont has never done fashion very well. It requires very different competencies from its core watches and jewelry businesses, where it excels.”Richemont is shifting its focus to the future in other ways: A few days after touting the growing importance of travel retail, Rupert bought a 5 percent stake in the travel retailer Dufry. “What will people be doing in 15-20 years’ time? I suspect they’ll travel, they’ll want to visit countries, they’ll want experiences,” which makes travel retail interesting, he said.The company has also reshuffled management and stacked the board with a new wave of digitally savvy executives — including some highly educated and accomplished women — whom Rupert is hoping will push and challenge him to innovate.“This is not window dressing,” Rupert said. “This is a whole new generation bringing skills, at all levels, to the non-executive board. Just look at what these people have achieved in life.”Although Richemont, like other big luxury players, has been resisting the shift to digital commerce, it has been taking small steps, selling more of its high-end watches through Net-a-porter Group, which it owns in part.Industry sources have told WWD that Richemont has begun hunting for “digitally savvy” people on both sides of the Atlantic, with the aim of creating a true omnichannel business.Rupert has also been retooling and wiping out the chief executive officer role and making the company, which saw sales and profits fall last year, less dependent on fixed costs and more reactive to market changes, such as the ebb and flow of the watch business.Nearly all of the Richemont tweaks have been met with a thumbs up from analysts: According to a report from Bernstein Research last month, Rupert's recent reorganization will contribute to a 13 percent-plus spike in ongoing earnings per share growth by fiscal 2021.Bernstein also said it expects more changes to come in the next years, and is positive on the long-term prospects of the conglomerate.
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