Swiss firm takes hit despite Brexit boost
Swiss luxury goods giant Richemont, which owns top global brands like Cartier, warned on Wednesday that weak demand and restructuring costs would slash first-half profits despite a boost in UK sales from Brexit.
The world's second-biggest luxury group forecast operating profit 45 percent lower at the end of September, which concludes the first half of its 2016-17 fiscal year, compared to the same period last year.
Sales plummeted 14 percent during the first five months of the fiscal year, which Richemont put down to "the challenging comparative figures in 2015, the repurchase of slow-moving watch inventory and the difficult global environment."
One-time restructuring costs of 65 million euros ($73 million) will also dent profits during the six-month period, the firm said.
"We are of the view that the current negative environment as a whole is unlikely to reverse in the short term," it cautioned.
European sales plunged 20 percent, dragged down especially by France, which saw far fewer tourists than usual following several deadly terrorist attacks.
The picture was rosier on the other side of the channel, with Britain showing swelling sales since its referendum at the end of June dented the value of the pound, making luxury goods there less expensive for foreign visitors.
In the Asia-Pacific region, another key market for the group, sales contracted 12 percent amid particularly weak demand in Hong Kong and Macau, forcing the company to buy back excess stock.
Japan also reported significantly lower sales compared to high figures last year, while the strength of the yen depressed tourist spending in the country, Richemont said.
The company, which also holds such brands as Piaget, Jaeger LeCoultre and Van Cleef & Arpels, meanwhile hailed overall sales growth in mainland China and South Korea.
And it said "positive momentum" in jewellery and accessories in the Americas had been offset by weak demand for watches, pushing overall sales down eight percent.
Following the news, Richemont saw its share price slump four percent in mid-morning trading, to 57.40 Swiss francs, while the Swiss stock exchange's main SMI index inched up 0.1 percent.