Cartier-Parent Richemont Warns on Profit After Slide in Sales

By Brian Blackstone

ZURICH-Swiss luxury giant Cie. Financière Richemont SA (CFR.EB) on Wednesday said sales tumbled in the five months through August and warned that profit will be down sharply, reflecting the challenges facing luxury-goods companies from weaker demand in Asia and a decline in tourism in Europe.

The Geneva-based owner of Cartier jewelry said sales fell 14% for the five months through August from the previous year at actual exchange rates. At constant exchange rates, sales fell 13%.

The company also said it expects operating profit for the six months through September to be down around 45% from the previous year.

"We are of the view that the current negative environment as a whole is unlikely to reverse in the short term," the company said.

The results came weeks after Swatch Group AG reported a 52% plunge in first-half profit. Net sales at the company, known for its cheap plastic watches but also the owner of expensive brands such as Omega, Blancpain and Breguet, fell 11%.

Watch makers and other luxury good companies have been hit by a series of shocks in recent years: weaker global growth that depresses incomes; anti-corruption drives in China; terrorism fears in shopping hubs such as Paris that have hurt tourism; and new entrants into the market, particularly makers of smart watches.

Richemont said that sales were down in much of Europe, "particularly in France, due to a significantly lower level of tourist activity."

In Asia, sales growth in mainland China and Korea "was more than offset by the continuing weakness of the Hong Kong and Macau markets," where the company is buying back inventory, Richemont said. Japan showed sharply lower sales in part due to the strong yen which hurt tourism there.

Sales also fell in the Americas, but at a slower rate than in other regions. They grew in the U.K. after the referendum to leave the European Union, which weakened the pound.

Richemont maintained an upbeat view about the long-term prospects for the luxury goods industry. The company "is well positioned," it said, citing a strong balance sheet and its well-known brands.

Write to Brian Blackstone at [e-mail]

(END) Dow Jones Newswires

September 14, 2016 02:39 ET (06:39 GMT)

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