Shares in Richemont, the owner of luxury brands such as Cartier and Montblanc, fell this morning as the company forecast a 45 per cent drop in first-half operating profit on the back of a sales slump and lower demand for watches.
In a trading update this morning, the Swiss luxury goods retailer said total sales had fallen 14 per cent in the five months to the end of August.
This was driven by a 16 per cent downturn in jewellery sales and a 19 per cent drop in watch sales — which usually provide almost half of the group's revenues.
The slump affected all regions but was the most extreme in Europe, where sales fell 20 per cent.
The company said there was a notable fall in sales in France "due to a significantly lower level of tourist activity", though revenue in the UK has "shown growth since the weakening of sterling" since the referendum.
Sales fell the least in the Americas, at eight per cent, where positive momentum in jewellery and accessories was offset by a weaker performance in watches.
Richemont's share price had fallen 4.7 per cent this morning to 8,450 South African cents on the Johannesburg Stock Exchange.
Why it's interesting
The Swiss company said sales had been impacted most by challenging comparative figures in 2015, the repurchase of slow-moving watch inventory, currency headwinds and the "difficult global environment".
Richemont said operating profit is likely to fall 45 per cent in the six months to the end of September, "reflecting the effect of one-off restructuring charges of approximately €65m (£55m)" and the effects of product buy-backs.
Earlier this summer, the boss of one of Italy's leading luxury goods makers warned there will be no let-up in the sector's slowdown and that firms must adapt to fit the changed market.
What Richemont said
The company said:
We are of the view that the current negative environment as a whole is unlikely to reverse in the short term. However, we remain convinced of the long-term prospects for luxury goods globally, and in particular for watches and jewellery.
Richemont is well-positioned, with a strong balance sheet and a portfolio of long-established maisons.