Richemont, second only to France's LVMH in the luxury world, said its sales during the October to December period had fallen four percent to €2.9 billion ($3.2 billion), not counting currency fluctuations.
Thanks to the shrinking value of the euro, the owner of such brands as Cartier and Piaget, meanwhile posted a three-percent hike in sales once currency shifts were factored in.
Sales in Europe meanwhile shrank three percent during the quarter in constant currencies, after soaring during the first half of the 2015/16 financial year.
Richemont said the slump reflected "lower levels of tourism in the region."
And the company acknowledged that "the challenging trading environment is likely to prevail in the final quarter."
Following the news, Richemont saw its share price fall nearly three percent to 63.50 francs a piece in afternoon trading on the Swiss stock exchange, as the main SMI index was down 2.2 percent.
The quarter, which is third in Richemont's accounting year, is vital to the luxury goods maker since it covers the all-important holiday season, and was marked by the deadly November 13th attacks in Paris and they impact they had on tourism, observers said.
Citigroup analyst Thomas Chauvet pointed out in a note that France alone accounts for nine percent of the group's global sales and around 25 percent of its European sales.
The Swiss-based company, which owns top global brands such as Jaeger LeCoultre, Van Cleef & Arpels and IWC, also lamented that the market in the Asia Pacific region remained "challenging" and "impacted by the continued contraction in watch demand."
Richemont saw its sales in the region - long the driver of global luxury sales growth - continue their recent descent and plunge nine percent during the third quarter.
The company stressed though that although Hong Kong and Macao remained hard-hit, the market in mainland China was improving.
Japan meanwhile stood out with a nine-percent uptick in sales during the quarter, the company said.
"The Christmas quarter sales were slightly below our expectation with Europe being weaker but Asia showing a first sign of improvement," Vontobel analyst Rene Weber said in a note, stressing though that Hong Kong remained "strongly down."
Richemont's share price, which last year crumbled 19 percent over concern over slowing growth in the Chinese economy, has shed nine percent more since the beginning of January.