LONDON — Johann Rupert is struggling to see the light at the end of the economic tunnel.
This story first appeared in the May 15, 2009 issue of WWD. Subscribe Today.
The executive chairman of Compagnie Financière Richemont SA, parent of such brands as Cartier, IWC, Chloé, Montblanc and Dunhill, said Thursday that sales in April, the first month of the new fiscal year, were down 19 percent due to strong comparative figures and the state of the world economy.
In reporting the company’s 2008-09 results, Rupert stated there are “very few encouraging signs” in the global economic picture, the U.S. market is “very weak,” and most European markets are “unsettled and trading remains hesitant.”
The only positive sales trends, he said, are coming from Asia, which posted 14 percent sales growth last year, and the Middle East. He said the double blow of strong comparative figures from the first half of 2008-09 and the rough economy means trading will remain “challenging” until September.
The statement added group chief executive Norbert Platt would retire at the end of the year and return to Germany, and that a hunt for his successor is taking place. Platt, age 61, became Richemont’s ceo in September 2004.
For the fiscal year ending March 31, Richemont’s net profit fell 31 percent to 1.08 billion euros, or $1.53 billion, from 1.56 billion euros, or $2.21 billion, due both to the economic climate and the group’s recent restructuring.
All figures have been calculated at average exchange rates for the period.
Richemont’s core of luxury wasn’t immune to the global recession. Net profits at the luxury goods division fell 23 percent to 751 million euro, or $1.07 billion, from 972 million euro, or $1.4 billion, due to a slowdown in second-half sales, and tough comparisons with the corresponding period last year.
Sales rose a total of 2 percent in the full year to 5.4 billion euros, or $7.7 billion, from 5.3 billion euros, or $7.5 billion. Richemont said sales hit record highs in the first six months, rising 10 percent.
Cartier posted a record year in terms of sales and profits. During a conference call, Platt said Cartier’s growth was coming chiefly from “high jewelry pieces, which customers consider a secure investment,” and from regions such as China, where Cartier has 30 boutiques; the Middle East, and France.
Overall, sales rose 4 percent at Richemont’s jewelry and watch houses, while sales at Montblanc fell 6 percent, and those at the leather and accessories divisions dropped 5 percent. Richemont said it is in negotiations to sell Montegrappa, the high-end pen brand it acquired in 2000 at the height of the luxury goods acquisition boom.
In the second half, overall sales at the luxury houses fell 5 percent. The company said the U.S. played a big role in the decline with pre-Christmas trading “very weak.” In the full year, the division’s sales in the U.S. fell 12 percent.
Sales at Richemont’s other businesses division, which includes Chloé, the Azzedine Alaïa label, and the watch component manufacturing businesses, rose 5 percent in the period. Richemont said Chloé’s sales were “well below” the level of the prior year, but the division overall was boosted by the acquisitions of Alaïa and the manufacturing firms.
Operating profits, however, fell “significantly,” largely due to the lower profitability of Chloé and losses incurred by the watch component activities.
This year, Richemont plans to close 60 underperforming boutiques worldwide, or about 8 percent of its store network, at brands including Montblanc, Cartier, Piaget, Van Cleef & Arpels and Lancel.
Platt said there were no current plans for layoffs, but the company would be relying instead on partial unemployment schemes. Last month, Cartier temporarily slashed the working hours of employees at its La Chaux-de-Fonds watchmaking facility in Switzerland.
Trading conditions aside, the group is solid: Richemont has 822 million euros, or $1.2 billion, in cash on its balance sheet. Rupert said the company was prepared for the downturn and would emerge from it stronger.