LONDON — Johann Rupert is taking more hands-on control of Compagnie Financière Richemont SA.
This story first appeared in the November 16, 2009 issue of WWD. Subscribe Today.
In April, Rupert, Richemont’s executive chairman and shareholder of reference, will take over as interim chief executive officer to guide the luxury firm, parent of brands including Cartier, Dunhill and Chloé, across what he expects to be a rocky road.
Sales in October, the first month of the crucial holiday third quarter, were down 10 percent worldwide, with the exception of Asia-Pacific, where they rose 11 percent — and Rupert isn’t pinning his hopes on a recovery any time soon.
“We remain cautious as to the sustainability of the improving economic outlook that we are seeing today, and are prepared for a long recovery process,” he said in an interim statement Friday, adding, “We will continue to plan for difficult market conditions.”
He also stressed Richemont was very exposed to currency fluctuations, and especially the weakening of the dollar and yen against the euro. “These currency trends will have a negative impact on the group’s results for the second half of the year,” he added.
Richemont executives said in a conference call Friday the outlook for Christmas was “difficult to predict,” and that Richemont was, like most companies, at the mercy of the end consumer.
During a separate conference call with analysts, Rupert said he would serve as interim chief executive officer, replacing Norbert Platt, who will retire on March 31 due to health issues.
The low-profile but hard-charging Rupert didn’t specify how long he’d remain in the ceo job, but made clear he didn’t want an outsider taking over during this critical time, and felt he needed to assume a more direct role in guiding Richemont — at least until the economy improves.
Rupert served for nine months as Richemont’s ceo in 2004, just before he appointed Platt to the role and while the company was coping with the impact of SARS, the war and occupation in Iraq, and the re-structuring of the ailing Dunhill and Lancel businesses.
Overall, analysts welcomed Rupert’s decision to take over day-to-day operations. “It seems a sensible decision, and it’s fine as long as it’s a temporary measure,” said one London-based financial analyst.
Another analyst said Richemont’s two big challenges going forward would be top-line recovery in the short-term, and continued cost cutting once the business starts to grow again.
On Friday, Richemont reported a 60 percent fall in profits to 344 million euros, or $481.6 million, from 860 million euros, or $1.2 billion, in the six months to September 30.
The company said the 2009 first half comparisons were particularly harsh, as Richemont had achieved record sales and profits during the corresponding period in 2008.
The decline in profits was due to a double-digit drop in sales across all product categories, and to extraordinary gains from the firm’s share in British American Tobacco last year. Richemont has since become a pure luxury goods firm, and no longer has a stake in BAT.
Stripping out the extraordinary items, profits in the six-month period would have fallen 36 percent.
Sales in the six-month period fell 14.9 percent to 2.38 billion euros, or $3.33 billion, from 2.80 billion euros, or $3.92 billion. Sales fell across all regions, with the exception of Asia Pacific, where they rose 6 percent in the period.
Cartier sales declined more drastically at wholesale than at retail, while bridal jewelry and high jewelry watches remained resilient. In the watch category, where sales fell 17 percent, Vacheron Constantin proved the most robust brand, while Baume & Mercier was the biggest victim of a reduction in wholesale orders.
In the conference call, Platt said most of Richemont’s watch brands were “too widely distributed” and the company would be taking a look at reducing the number of third-party watch dealers.
He added the group was mulling opening Richemont-owned, stand-alone watch stores “to promote the image of the watch brands” in major cities worldwide.
With regard to other strategy shifts, Platt pointed to the revival this week of Les Must, Cartier’s entry-price collection first launched in the Seventies. Although the designs are completely different from those of 30 years ago, the concept is similar.
“This is a ‘welcome line’ to induce people to come into the stores, especially in the U.S. where traffic has been down tremendously,” he said. The collection of jewelry, watches and small leather and silk accessories is stocked at Cartier stores worldwide. Prices range from 45 pounds, or $75, for a goatskin business card holder to 1,500 pounds, or $2,500, for a pink gold and pink tourmaline pendant.
At Richemont’s fashion and accessories division, sales at Dunhill and Lancel were flat, and those at Chloé were down in the period. Richemont did not comment on the performance of its other brands — Shanghai Tang, Maison Alaïa or Purdey.
One of the only bright spots was Asia-Pacific: Platt said he’s not even calling it an emerging market anymore. “China, Russia, the Middle East — these are no longer emerging markets,” he said. “For us, they are growth markets.”