LONDON — Compagnie Financière Richemont plans to enter into talks with unions, with an eye to slashing 200-250 jobs as demand for high-end watches continues to flounder.
Talks between the luxury group, parent of brands including Cartier, IWC, Van Cleef & Arpels and Dunhill, are set to begin this month, according to industry sources, and the aim is to keep headcount reductions to a minimum.
Richemont has declined to comment on the potential job cuts.
Earlier this month, Richemont announced a 51 percent decline in first-half profits to 540 million euros, or $605 million, and a 12.6 percent drop in sales to 5.09 billion euros, or $5.7 billion.
Sales in its specialist watchmaking division, which includes Vacheron Constantin, IWC, Panerai and Piaget, decreased by 17 percent in the half, while those at Richemont’s jewelry brands, which also sell watches, were down 13 percent.
Earlier in the day, Bloomberg, citing Unia trade union sources, said the biggest cutbacks would likely be at Piaget and Vacheron Constantin.
Over the past year Richemont has been systematically buying back some of its highest-priced watches, most of them Cartier gold ones, harvesting the jewels, and melting down the metal.
The watch buybacks are aimed at helping third-party retailers clear stock without resorting to promotions, and cost Richemont 249 million euros, or $279 million, in the half.
Earlier this month Richemont had ruled out layoffs in its watch division during a conference call to discuss the first half-results. Gary Saage, Richemont’s chief financial officer, said the company would continue to invest in manufacturing while also “gaining efficiencies” in the process.
Richemont is currently building a new IWC manufacturing facility and technology center in Schaffhausen, in northern Switzerland, and extending a worldwide logistic center in Fribourg, in western Switzerland.
The latest layoffs would be the second major round of cuts in Richemont’s watch division this year. In February, the luxury goods giant said it would slash up to 350 jobs from its watch manufacturing operations in Switzerland, or up to 4 percent of its Swiss workforce. Close to 30 percent of the group’s headcount is located in Switzerland.
Richemont has been grappling with the strong Swiss franc and a crisis in the high-end watch business. A crackdown on bribery in China and a change in tourism and shopper habits has damaged the watch business, especially with regard to third-party retailers.
During the call earlier this month, Saage talked about adjusting to the “new normal” for the watch business.
“Before the gifting explosion in China, we were seeing modest growth in watches. We don’t know where sales are going to be in the future, but we can no longer expect a return to growth of 20-odd percent. We’re looking at this — and all parts of the business — on an ongoing basis.”
It is also understood that Richemont is adapting its watch offer and implementing cost reductions at headquarters and at regional levels in the absence of a recovery in the sector.