June 6, 2003
By Bloomberg
Milan - Richemont, the world's second-largest maker of luxury goods, plans to cut 200 watchmaking jobs in Switzerland, shutter Dunhill stores in the US and halt Lancel brand expansion as sales and profit slide.
Revenue in April and May dropped 27 percent as the dollar fell and a deadly new virus curbed travel. Profit in the year to March 31 declined 22 percent as Van Cleef & Arpels sales shrank, said Richemont.
Billionaire South African chairman Johann Rupert, who turned the company from an apartheid-era firm into a worldwide luxury group with brands such as Cartier, is cutting expenses to match the strategy of rivals, including Bulgari, as economies falter. Sales in the €58 billion luxury industry may drop 10 percent this year, according to Intercorporate Consulting.
"They didn't cut costs fast enough when the environment deteriorated, now people are waiting to see what they will do," said Scilla Huang Sun of Clariden Bank.
Net income slid to €642 million (R6.12 billion) in the year to March 31 from €826 million. Sales fell 5 percent. Operating profit dropped 46 percent to €259 million, more than expected
. The company said in March that operating profit for the year was down about 40 percent.
"I cannot blame our problems on external factors," said Rupert. "We were too content. Now we need to have a sense of urgency."
Richemont will stop watch assembly at the Cartier factory in Villeret, Switzerland.
The watchmaking jobs will be eliminated in Geneva, La Chaux de Fonds and Villeret. They represent 5 percent of the firm's workers who make watches in the country.
In the US, the main Alfred Dunhill store on New York's Fifth Avenue will stay open. Others will be closed. Expansion of Lancel, a leather and luggage brand, will be halted.
Rupert, who was chief executive of Rothmans International and ran his family's investment bank in South Africa, is bolstering his executive role before the scheduled October retirement of Richemont chief executive Alain Perrin, who will not be replaced.
"I do not believe that one person can successfully run 11 brands. Our business model is to have a proper structure with individual brand chief executives running each company," Rupert said. - Bloomberg
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