The crisis in the global luxury-goods industry deepened after Hermes International SCA abandoned a long-standing forecast and Richemont predicted a profit plunge that Chairman Johann Rupert deemed unacceptable.
Richemont, the maker of Cartier jewelry, said first-half operating profit will probably decline about 45 percent and warned it may have to deepen cost cuts. Kelly bag maker Hermes, traditionally among the industry’s most resilient companies, scrapped a target for 8 percent annual sales growth, replacing it with what it described as ‘an ambitious goal.’
Shares of both companies slid, dragging other luxury stocks down with them. The industry is grappling with another year of waning demand as China’s campaign against extravagant spending is compounded by a drop in tourism after terrorist attacks in France and Belgium, a situation Rupert characterized as a ‘fiasco.’ Richemont’s revenue slid 13 percent, excluding currency shifts, in the five months through August, missing analysts’ estimates.
This post was published at David Stockmans Contra Corner on September 15, 2016.
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