Richemont Drops on October Sales Decline, New Cartier CEOby
Maker of IWC Swiss timepieces sees challenging second half
Outlook spurs decline in shares of rivals LVMH and Swatch
Richemont shares fell the most in two months after a surprise sales drop in October and the departure of the head of jewelry and watch label Cartier, which leaves the Swiss luxury-goods maker’s biggest brand without a permanent chief during the critical Christmas period.
The unexpected downturn also pushed shares of LVMH Moet Hennessy Louis Vuitton SE and Swatch Group AG lower. Cartier Chief Executive Officer Stanislas de Quercize has stepped down and will be replaced with the head of LVMH’s Japanese unit in January, the Geneva-based company said Friday. Sales dropped 6 percent last month at constant exchange rates as demand from retailers for watches has weakened, Richemont also said.
The leadership change comes as Cartier struggles to turn around its Swiss timepiece business. Demand for watches has slumped across Asia, where Richemont generates almost half of its revenue, and the business’s profitability is also being eroded by this year’s surge in the Swiss franc. Switzerland’s watch exports had the biggest decline since 2009 in the three months through September.
“It is going to be a bit of a slog in the second half,” said Jon Cox, an analyst at Kepler Cheuvreux. “The 6 percent constant currency sales decline in October is going to set alarm bells ringing.”
Shares of the company, whose full name is Cie. Financiere Richemont SA, traded 8 percent lower at 79.65 francs as of 11:03 a.m. in Zurich. LVMH dropped 4.9 percent in Paris and Swatch was down 5.1 percent.
Cyrille Vigneron, a 25-year Richemont veteran who left Cartier two years ago to join LVMH, will lead the watch and jewelry brand starting Jan. 1. De Quercize is giving up the position for personal reasons after almost three years in the job and will become the chairman of Richemont France. Chairman Johann Rupert said the company regrets his decision to stand down. The executive has been off work due to illness for several weeks, Reuters said on Nov. 2.
“This unexpected announcement will add more uncertainty to a challenging second-half outlook and raise further questions on the timing of Cartier watch business recovery,” Thomas Chauvet, an analyst at Citigroup, wrote in a note to investors.
Sales of watches fell 4 percent at constant exchange rates in the six months through September, mostly caused by weak orders from retailers in Asia and the Americas, Richemont said.
“When things are uncertain, retailers are afraid to order,” said Zuzanna Pusz, an analyst at Berenberg in London. “A lot of it is also a psychological effect, with what’s going on on the stock market and people saying things are slowing down.”