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Richemont’s sales have declined in all the regions, with the biggest loss of 20 percent in Europe.
Hermes’ first-half operating margin reached a record high 33.9 percent, up from 32.5 percent previous year, which it said was boosted by favourable foreign exchange hedging contracts.
PARIS, Sept 14 French luxury goods maker Hermes on Wednesday said it would no longer provide an annual sales growth forecast starting next year due to the increasingly uncertain trading environment.
Richemont’s share price had fallen 4.7 per cent this morning to 8,450p on the Johannesburg Stock Exchange.
The luxury industry is grappling with another year of waning demand as China’s campaign against extravagant spending is aggravated by a drop in tourism after terrorist attacks in France and Belgium. Hermes has increased production of leather goods, the company’s largest and most profitable division with some items commanding waiting lists that can run for more than a year. The Geneva-based maker of Vacheron Constantin timepieces also reported a 13 percent slide in revenue in the five months through August, excluding currency shifts, missing analysts’ estimates.
“We have to be frank and transparent, we see first half results that were better than we expected, but there is a lot of uncertainty around the world and the rigidity of written guidance means we are less flexible”, said Chief Executive Officer Axel Dumas. Analysts predicted 818.5 million euros, according to the median of 12 estimates.
Luxury goods firm Richemont expects first-half profits to almost halve after sales slipped in the first five months of its financial year and it was forced to buy back inventory from Asia in the face of weak demand.
“One-time restructuring costs of 65 million euros ($73 million) will also dent profits during the six-month period, the firm said”.
“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 their annual general meeting (AGM) on Wednesday. “The world now has an excess of every manufactured good”.
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“We are of the view that the current negative environment as a whole is unlikely to reverse in the short term”, it cautioned.
