The Swiss owner of Cartier watches saw its share price plunge after announcing that pro-democracy protests in Hong Kong had hit sales, while a shock decision to end Switzerland’s currency cap against the euro eroded investor confidence.
Richemont, which is the world’s second-largest luxury goods firm, owns brands including Purdey shotguns and Van Cleef & Arpels jewellers.
It was the biggest faller on the Swiss stock market on a day expected to be the worst for the index since Black Friday in 1987.
In early trading, Richemont led the fallers on the Swiss stock market, as SFr127bn (£85bn) was wiped off the value of Swiss companies, following a surprise decision by Switzerland’s central bank to abandon its three-year-old cap of 1.20 francs against the euro. Shares in Richemont tumbled 17%, followed by Swatch, down 14%, and the Julius Baer private banking group, down 12%. The overall Swiss market was down nearly 10%.
Watchmakers were hardest hit, because the central bank’s decision to scrap the currency cap will make their goods more expensive in vital foreign markets. Nick Hayek, the boss of Swatch described the decision as “a tsunami” for Switzerland and its export industry.
The shock decision came as Richemont revealed that sales in Asia had fallen as a result of pro-democracy protests in Hong Kong and a crackdown on lavish gift giving in China.
Richemont’s sales in Asia Pacific were down 12% to €1.07bn (£822m) in the final three months of 2014, as a result of a “difficult trading environment in most markets, primarily in Hong Kong and Macau”, the company said. Pro-democracy protests blocked off Hong Kong’s main shopping districts from late September to December, while attempts by the Chinese government to rein in corruption have dampened demand for luxury goods.
In 2013, Asia accounted for almost 40% of Richemont’s revenues, but the company was able to offset the recent decline by improving sales elsewhere. Sales in Europe rose 9% as favourable exchange rates encouraged tourists to splash their cash on the firm’s luxury watches and designer clothes. Richemont’s total sales for the quarter were €3.05bn, flat when measured against a constant exchange rate value.
Earlier this week, British luxury brand Burberry said a fall in sales in Hong Kong in the final quarter of 2014 could hit full-year profits, despite an increase in overall sales. Carol Fairweather, Burberry’s chief finance officer, said shoppers had stayed away from Hong Kong during the protests. The US jeweller Tiffany also cut its profit forecast for 2014, citing a disappointing holiday shopping season and weak demand in Japan.
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