Business News: Richemont Chairman Lauds Rival Watchmakers Reducing Production To Align With Weak Demand From China
The chairman of Cartier-owner Richemont is heaping praise on Swiss watchmakers who cut production in response to weak demand from China to avoid oversupplying the global market. Johann Rupert, who controls the Swiss-based luxury conglomerate that owns many brands including Jaeger-LeCoultre, IWC, and Panerai, says some of the biggest names in watchmaking have adjusted volumes in response to the China-led downturn.
“I’m glad to say the majority of the people did that, and I can say people like Rolex did that, and people like Patek [Philippe] and AP [Audemars Piguet]. We all behaved sensibly,” Rupert said on a conference call following Richemont’s annual financial results.
The South African billionaire first implored the watch industry to throttle back production at Richemont’s annual general meeting in September, warning that an oversupply in the market could lead to discounting that would harm brand equity. “I actually pleaded that the whole of this industry would look at its total absorption rate and produce according to what the total market can absorb,” Rupert said Friday on the call.
The comments came after Richemont reported annual and quarterly financial results that saw the company’s jewelry unit, which includes Cartier and Van Cleef & Arpels, report better than expected performance while the specialist watchmakers division suffered a sharp drop in sales and operating profits. Richemont executives confirmed the company lowered production volumes at some of its watchmakers in response to ongoing demand weakness from consumers in the Asia Pacific Region, led by China, which accounted for 44% of annual watch sales for the unit. The company also bought back stock from some watch retailers in China and utilized Switzerland’s ‘short-time work’ program to furlough workers at some manufacturers, executives said.
Richemont said its Vacheron Constantin and A. Lange & Söhne brands outperformed the wider market, as did watch sales from Cartier, which is among the top five Swiss watch brands by sales, according to analyst estimates.
“Some maisons had higher exposure to China, so they were affected much, much more,” Rupert said of the downturn in watch sales.
While the watchmaker division sales improved slightly in the second half of Richemont’s fiscal year to post a fourth quarter 11% drop, they declined 13% overall on an annual basis to 3.3 billion euros. Sales to the Asia Pacific region, excluding Japan, fell by 27%. Sales in other regions were relatively strong or stable during the 12 months ending March 31, with the Americas rising 7% and Japan gaining 9%. Watch sales to Europe fell 1% during the period, while Middle East and Africa sales rose 1%.
Company executives said the soaring cost of precious metals, the strong Swiss franc, and the move to buy back stock from some retailers in China weighed on the profit margins of the watchmaker’s division as annual operating profit dropped 69% to 175 million euros.
Richemont’s annual results follow rival Swatch Group, which reported a 15% decline in sales and a 75% drop in operating profit in 2024. Swatch, whose top brands include Omega, Longines, and Breguet, also said weak demand in China was responsible for the downturn.
Richemont executives confirmed that its Specialist Watchmakers unit would no longer have a permanent head as part of a restructuring that saw former division leader Emmanuel Perrin, in March, move to Panerai to become CEO. Executives have said that each watchmaker’s CEO would now be responsible for the performance, sales, and balance sheet of their own brand.
Perrin’s move to Panerai was the latest management shakeup at Switzerland-based Richemont under Chief Executive Officer Nicolas Bos, who was appointed to lead the company in 2024 after a successful turn as the head of Van Cleef & Arpels that saw the jewelry brand’s sales more than triple under his leadership.
Jérôme Lambert, who also previously held the role of Richemont CEO, recently returned to lead the Jaeger-LeCoultre brand. Other changes have included former Vacheron Constantin CEO Louis Ferla taking over as the head of Cartier, and Catherine Rénier, who previously led Jaeger-LeCoultre, moving to the top job at Van Cleef, and Laurent Perves taking over as Vacheron CEO.
Rupert and other Richemont executives wouldn’t comment on the outlook for U.S. consumer sentiment, as dramatic shifts in U.S. trade policy, including tariffs on imported goods, have upended markets and consumer confidence. The Richemont chairman, however, said he expected the tariff situation to eventually be clarified. “I do believe that the United States are using the tariffs in a transactional manner,” he said.
”And I do believe that there are wise people in Treasury in the United States that do not wish to have a total cessation of world trade.”
Hodinkee
