Cartier owner Richemont (CFRUY) painted a bleak picture of the outlook for luxury goods makers and announced restructuring measures including store closures as it reported a steep decline in April sales.
April sales fell by 18% and 15%, on a reported and constant basis, Richemont said, as it reported a 23% decline in full-year operating profit. Within its bundled regions, the only growth in April came from the Middle East and Africa, when measured at constant exchange rates, with Asia Pacific also down despite a 26% increase in April sales in mainland China.
"The challenging comparatives will persist through September," said Richemont chairman Johann Rupert. "In the near term, we are doubtful that any meaningful improvement in the trading environment is to be expected."
Richemont said it is cutting costs in its watch operation and planned to "consolidate its global retail presence, particularly in mainland China," while investing further in jewelry.
Operating profit in the year ended March came in at €2.06 billion ($2.31 billion), down from €2.67 billion because of the cost of restructuring measures initiated to counter the Asia Pacific downturn and after the company missed out on a one-time boost it got the year earlier. Operating profit was below a consensus compiled by Bloomberg for earnings of €2.29 billion.
Full-year revenue rose 6% to €11.08 billion, a figure helped by favorable exchange rates.
"Our concerns over geopolitical risks and the impact on the behavior of our clients proved justified. Europe turned negative in mid-year and trading conditions in Hong Kong and Macau remained difficult," the company said. "Only mainland China showed good growth."
Richemont suffered in the final quarter from slower tourist spending in Europe after terrorist attacks, while its Hong Kong business continued to bear the brunt of a strong Hong Kong dollar which, combined with a slowdown in Chinese growth, deterred mainland tourists.
The company is increasing its dividend by 6% to Sfr1.70 ($1.72).