LONDON — High-end watches and jewelry were among the biggest victims of an ongoing clampdown in consumers’ luxury spending in the first five months of the year, Compagnie Financière Richemont SA said Wednesday.
This story first appeared in the September 10, 2009 issue of WWD. Subscribe Today.
Richemont, parent of brands including Cartier, Jaeger-LeCoultre and Van Cleef & Arpels, said in a trading update for the period from April to August that specialist watch sales fell 18 percent, while jewelry fell 14 percent.
Overall sales fell 16 percent compared with the corresponding period last year, and executive chairman Johann Rupert said it’s too early to make any projections about sales performance in the second half.
“Although the rate of decline in sales is slowing, we still urge caution,” he said. “We would prefer to wait until we have more evidence of a broader economic recovery before speculating on the likelihood of a better second half.”
He reiterated that profits for the first half would be “significantly” below last year’s level, but pointed out Richemont had a robust balance sheet with no debt and 820 million euros, or $1.18 billion, in cash.
The statement, which only reported percentage changes, said America was the worst-performing region, with sales down 36 percent, followed by Europe, where they fell 22 percent, and Japan, which registered a 7 percent decrease. Sales in the Asia-Pacific region, including China, rose 5 percent.
Richemont’s wholesale business was down 21 percent, reflecting destocking by retailers, mostly in America, while the retail business shrank 7 percent.
The decline in demand for luxury goods has negatively impacted Richemont’s other divisions as well: the company said there was a “significant decline” in turnover at the group’s watch component manufacturing activities due to a lack of demand throughout the industry.
With regard to Richemont’s other product categories, the writing instruments division saw sales fall 17 percent while leather and accessories fell just 1 percent. A Richemont spokesman told WWD the relatively good performance in that category came from the growth and development of the Dunhill business in Asia, and the fact that both Dunhill and Lancel are retail, rather than wholesale, businesses.
Richemont’s Other Businesses division saw sales fall 23 percent, mostly reflecting the decline in demand at the watch component manufacturers. The firm will publish full interim results for the period ending Sept. 30 in November.