Richemont forced to buy back stock from Asia
Luxury goods firm Richemont expects first-half profits to nearly halve after sales slipped in the first five months of its financial year and it was forced to buy back inventory from Asia.
“Buy-backs and store closures will not be the end of it – we’ll have to slim down into the real demand of the market,” controlling shareholder and chairman Johann Rupert told investors at the company’s annual meeting.
Richemont said low tourist activity hit sales in Europe, particularly France, while Japan had high comparable figures and a strong yen.
Sales in the five months to the end of August fell 14 per cent. Stripping out the impact of currency changes, sales were down 13 per cent.
The maker of Cartier jewellery and IWC watches has made staff cuts and also bought back watches from retailers in Hong Kong, where sales started a downward path about four years ago when China’s government began to crack down on gifts for favours, exacerbated by political protests in 2014 plus a drop in mainland tourists.
“To my amazement, not too many of our competitors are following suit… some of them, esteemed companies, continue to pump excess stock into the market that will inevitably end up in the grey market,” Rupert said.
However, the company’s finance chief, Gary Saage, said the inventory buy-backs were largely over and no more job cuts were planned. But given there was no sign the negative trends would reverse in the short term, Richemont expects its operating and net profit in the six months to the end of this month will fall about 45 per cent.
“Obviously, to me, that’s unacceptable,” said Rupert, noting that the firm had enough reserves to withstand the problems.