Richemont sees dramatic drop in demand for luxury goods
AFP - 2 hours 50 minutes ago
ZURICH (AFP) - - Luxury goods giant Richemont, owner of prestige brands such as Cartier and Montblanc, said it was experiencing the toughest market conditions in its 20-year history after demand fell "dramatically" in the final quarter of 2008.
The Swiss-based group reported turnover of 1.55 billion euros for the third quarter of its 2008 to 2009 financial year, a decline of 12 percent compared to a year earlier at constant exchange rates.
"Demand for luxury goods, as in other sectors of the economy, has fallen dramatically and Richemont is currently facing the toughest market conditions since its formation 20 years ago," the company said in an interim financial statement.
At current exchange rates, the decline in turnover for the three months to December was 7.0 percent, it added.
Richemont gave a pessimistic assessment of the year to come and said it was "committed to take the necessary steps to not only see the difficult times through but to emerge stronger."
A company spokesman confirmed later on Monday that 180 out of some 200 staff at a Cartier plant producing watch casings in western Switzerland would be put on part-time work for three months from February.
Swiss watch exports have fallen sharply in recent months as the global credit crunch has slashed growth and demand.
Richemont said the overall decline in luxury goods sales worsened over the final quarter of 2008, especially in the United States where they fell 24 percent from a year earlier.
The group saw "no cause for optimism" in the current economic climate.
"We must assume that there will be no significant recovery in the foreseeable future and plan accordingly to cope with this situation," it added.
Richemont said its conservative management had nonetheless placed it in a good situation to weather the crisis.
"We don't have debt, we have one billion euros in our treasury and our brands are strong," the company's South African chief executive Johan Rupert said in an interview with the French daily Le Figaro published on Monday.
Last September, the company reported that the top end of the market was proving resilient to the financial crisis as sales rose 11 percent over a five month period. But it had also warned that it was not immune from a slowdown.
Richemont owns a host of luxury jewellery, watch and fashion accessory brands, including Cartier, Van Cleef & Arpels, Piaget, IWC, Baume & Mercier, Vacheron Constantin, Montblanc, Alfred Dunhill and Lancel.
It also manages substantial financial interests, notably an investment in British American Tobacco (BAT). In October, the group carried out longstanding plans to separate its investment management from the luxury goods business.
Richemont's share price on the Swiss stock exchange closed down 3.9 percent at 16.89 Swiss francs in an overall market that was down one percent.
Analysts gave a downbeat assessment of the outlook for the luxury goods sector after Richemont's announcement.
"The crisis now appears to have definitely arrived among luxury goods producers and hopes that this sector could still be spared are now dashed," Wegelin Bank said in a market report.
ZuercherKantonalbank said the worst for the industry has yet to come.
Richemont was unusually frank about its long-standing fears for global financial stability.
The usually discreet luxury goods firm blamed "many activist shareholders and investment bankers" for generating excess leverage that "now has to be unwound with panic measures and unseemly haste."
--- Dow Jones Newswires contributed to this article ---
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People pass a shop of the luxurious brand of Cartier at the Bahnhofstrasse in Zurich in 2008. Luxury goods giant Richemont, owner of prestige brands such as Cartier and Montblanc, said it was experiencing the toughest market conditions in its 20-year history after demand fell "dramatically" in the final quarter of 2008.
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