NEW YORK (TheStreet) -- Richemont  (CFRUY) reported a 45% drop in operating profits on Tuesday for the first half of 2016, reflecting the overall downtrend in the luxury industry, CNBC's Robert Frank reported on "Power Lunch" Wednesday afternoon. 

While we've seen issues with Neimen Marcus, Prada (PRDSY) and Burberry (BURBY), the slump in the luxury sector is now hitting industry leaders Richemont and Hermes (HESAF) as well, Frank said. 

Richemont, which owns Cartier, Dunhill and other luxury brands, also gave a negative outlook saying,"There is an excess of every manufactured good in the world" and that "the negative environment is unlikely to reverse in the short-term," Frank reported. 

The company's main financial issue is with its watches as a result of the crackdown on corruption in China, he said. Swiss watch sales are down 42% in Hong Kong.

"Cartier and others have been buying back thousands of watches in Hong Kong and destroying them or moving them to other markets," he said. 

The company said it will continue to reduce staff and close stores to try to survive the trend, Frank noted. 

In addition, Hermes, "always considered the top leader in luxury," reported strong profits, but said it's abandoning its 8% sales target for the year, he said.

While Heremes' first-half results were better than expected, "there is a lot of uncertainty around the world" the company's CEO Axel Dumas said in a conference call. 

"That is the understatement of the year," Frank commented. 

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