revenue slid 13 percent, excluding currency shifts, in the five months through August, missing analysts’ estimates. Richemont said the decline in operating profit for the six months through September includes one-time restruc- turing charges of about $73.0 million, without explaining them. Analysts had expected a 41 percent drop, accord- ing to estimates compiled on Bloomberg. “We have to slim down into the real demand of the market,” Rupert said. “The world currently has an excess of every manufactured good.” Tough business conditions are likely to persist for the rest of this month, Richemont said. “We are of the view that the current negative environment as a whole is unlikely to reverse in the short term,” the company said. As Richemont said the current negative environment means they are not alone as Kelly Bag maker Hermes, which has been traditionally strong when it comes to industry fluctuations, recently changed its sales growth target from 8 percent to what its described as “an ambi- tious goal” after first-half profit beat estimates with earnings before interest and tax at $928 million, analysts had predicted $919.0 million. But all the news is not great as it was reported that on a recent conference call that Hermes’ CEO, Axel Dumas said he anticipates earnings will be lower in the second half than the first. “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,” Dumas said. Shares of both Hermes and Richemont were down on the news of the changed sales forecast, dragging other luxury stocks down with them which is not good news for an industry that is already hurting.
By Katie Davis W hen the economy tightens the rich stop buying and the middle class simply cannot afford luxury goods and given the outlook on the global economy the news is not good for the global luxury- goods industry and the companies in it like Hermes Inter- national SCA and Richemont which are predicting profit plunges as the industry weakens. Hermes is a French high fashion luxury goods manufac- turer established in 1837, which specializes in leather, life- style accessories, home furnishings, perfumery, jewellery, watches and ready-to-wear collections. Richemont is a Switzerland-based luxury goods holding company, most known for the Cartier jewelry line, was founded in 1988 by South African businessman Johann Rupert. Through its various subsidiaries, Richemont designs, manufactures, distributes and sells premium jewellery, watches, leather goods, writing instruments, firearms, clothing and accessories. Richemont announced recently that its first-half operating profit will probably decline about 45 percent and warned the company may have to deepen cost cuts measures in response to weakening industry numbers. Richemont’s
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SPOTLIGHT ON BUSINESS • OCTOBER 2016
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