Swiss luxury brand Richemont saw first-half earnings fall by almost 24%. The sharp decline is synonymous with one in the Chinese market after a lower Asian demand for luxury goods.
The world’s largest jewellery maker said on Friday that profit for the six months to the end of September tumbled to €908mn from €1.19bn on the year earlier, missing analysts’ expectations of profit of around €1.09bn.
Richemont, who owns Cartier, Piaget and IWC brands, said sales increased 2% to €5.43 bn, although they fell 2% as trade weakened in two main markets China and Hong Kong.
Exchange rates were also not in favour of the brand with €239mn lost on contracts used to reduce the risk of currency fluctuations. Richemont hedges most of its non-euro denominated sales.
“The results confirm a difficult demand environment for luxury goods and a likely low key end to a soft 2014 for the industry” said Luca Solca, an analyst at Exane BNP Paribas .
“Sales in Asia Pacific and China within it seem to be on the back foot” he added.
In a similar fashion to other luxury brands, Richemont has struggled after an an anticorruption drive in China has impacted on sales of liquor, watches and other luxury products generally offered as gifts. Pro-democracy protests in Hong Kong, the world’s largest market for Swiss watches, have also affected revenue, nearly 40% of which Richemont typically derives from the Asia Pacific region.
Sales in October, the first month of the second half year of its fiscal, rose 4% although they were lower in the Asia Pacific and Japan. The slowdown in Asia has prompted the brand to reduce working times for 230 staff at one of its Swiss watch factories.
In those first six months, sale growth in Europe fell by 2% from 8% in the same period last year, attributed by Richemont to fewer tourists and careful buying from retailers.
Sales in America are performing better, having risen 10% thanks to a higher spending from domestic consumers for watches and jewellery.
Last month, Richemont won a UK court ruling that ordered internet providers to block websites selling counterfeit goods, said by a judge to be the first case of its kind in Europe.