Richemont Forecasts 45% Profit Slide as Hermes Abandons Goal

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  • Hermes abandons mid-term goal for 8% annual sales growth
  • Reports add to gloom spreading across luxury-goods industry

Richemont 5-Month Constant FX Sales Miss Estimates

Richemont, the maker of Cartier jewelry, said first-half operating profit will probably decline about 45 percent, while Hermes International SCA abandoned its annual sales growth target, adding to the gloom spreading across the luxury-goods industry.

Revenue slid 13 percent excluding currency shifts in the five months through August, Geneva-based Richemont said Wednesday, missing the median analyst estimate for an 11 percent decline. Hermes said it’s no longer forecasting annual revenue growth of about 8 percent excluding currency shifts, and instead has “an ambitious goal” for growth.

The Swiss watch industry is grappling with another year of declining exports as China’s campaign against extravagant spending is aggravated by a drop in tourism after terrorist attacks in France and Belgium. Richemont said it’s unlikely the current negative environment will reverse in the short term. Swatch Group AG reported a 54 percent decline in first-half profit in July.

Richemont’s comments that the current difficult environment is likely to persist “could imply further downside,” said Zuzanna Pusz, an analyst at Berenberg.

Sales at Richemont’s watchmaking business fell 18 percent, while revenue at its jewelry unit slid 15 percent. Analysts had called for a drop of 11.5 percent and 10.5 percent, respectively. Revenue in all its main regions declined.

The company, whose full name is Cie. Financiere Richemont SA, reports five-month sales figures each year on the day of its annual general meeting with shareholders.

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