Swiss franc to hammer Richemont profits

Zurich - Swiss company Richemont, home to brands such as Cartier, beat expectations for five-month sales, helped by Asia, and said while first-half sales would be significantly higher, net profit was likely to be flat due to the strong Swiss franc.

The world’s second-largest luxury goods group, which competes with Swatch and LVMH, posted a 35% jump in five-month sales in constant currencies on Wednesday, beating expectations.

Richemont said the uncertain economic outlook for the West was likely to weigh on demand for its watches and jewellery.

Chief executive and chairperson Johann Rupert said: "The rest of the financial year is difficult to predict. The problems of fiscal deficits generally and eurozone difficulties in particular are likely to act as a drag on business prospects".

His comment echoed those of Philippe Merk, chief executive of independent watchmaker Audemars Piguet, who told Reuters in a recent interview the declining mood in Europe and North America would not leave the watch industry unscathed.

At actual exchange rates, Richemont sales were up 29% in the five months from April to August, also ahead of the estimate of 17% in a Reuters poll.

The Asia-Pacific region is still leading the way with a 59% rise, while sales were up 22% in Europe and 41% in the Americas region. Disaster-shaken Japan saw sales grow 8% at constant currencies.

"The figures are far ahead of expectations with positive surprises all over, especially for Asia and the Americas, therefore beating all first-half figures from EU peers," Vontobel analyst Rene Weber said.

Richemont shares, which had slumped over 20% this year on worries about the strong Swiss franc hitting its business, were indicated to open nearly 4% firmer, according to pre-market data provided by Clariden Leu.

Makers of luxury goods have been benefiting from increasing consumer spending in emerging markets like China, making them less vulnerable to a potential economic slowdown in Europe and North America.