Richemont sees challenging H2 as demand weakens further

Cartier owner Richemont said it expected a challenging second half after net profit in the first half to September grew less than expected and demand for its products deteriorated further in October.

Watchmakers are grappling with weak demand in their biggest market, Hong Kong, where retailers are reducing inventories and closing shops. Shipments of Swiss watches to Hong Kong were down 20.5 percent in the first nine months of 2015.

"For the second half of the year, we expect the situation, particularly in wholesale, to continue to be challenging," the Geneva-based maker of luxury watches and jewellery said in a statement on Friday.

Richemont's flagship brand Cartier has to digest a change at its helm as chief executive Stanislas de Quercize, who has held the job since the end of 2012, will be replaced as of Jan. 1 by Cyrille Vigneron, currently president of LVMH Japan.

Richemont said de Quercize was stepping down for personal reasons. Reuters reported earlier this week that he had been off work for several weeks due to health problems.

"Apparently Vigneron has been in Cartier previously before moving into LVMH. Of course you still have Bernard Fornas as co-CEO who ran Cartier for a number of years," Kepler Cheuvreux analyst Jon Cox said.

Net profit at Richemont rose 22 percent to 1.103 billion euros ($1.20 billion) in the first half, short of a forecast for 1.19 billion euros in a Reuters poll.

The operating margin fell to 24 percent, after 26 percent in the year-ago period, as strong demand for high-margin jewellery could not make up for the pronounced weakness in the group's specialist watchmakers.

Half-year sales at Richemont rose 3 percent at constant currencies to 5.82 billion euros ($6.33 billion), lagging a forecast for 5.94 billion in the poll. Sales in October fell 6 percent, the company said.

$1 = 0.9195 euros