Richemont sales fall as credit crunch bites rich

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Richemont's chairman Johann Rupert said: "Although our maisons have seen steady demand in the period through to the end of September, the turmoil experienced in October has started to impact demand for the group's products."

Richemont's sales in the six months to end-September rose 10% with strong demand for top-end names like Van Cleef & Arples. But in October sales growth shuddered to a near-halt, rising by just 1.6%. And all of that came from the stronger yen and dollar. Taking out the currency effects, sales were actually down by 2% in the month.

Rupert said: "The largest decline was seen in the Americas region, although Asian markets continued to grow at a double-digit rate. Europe also registered a decline despite strong sales to non-European customers."

He had no doubts the effects of the financial crisis were starting to hit home to the IWC watch-wearing investment bankers.

"Reality has now set in," declared Rupert. A protracted period of reckless assumption of risk and debt is now being forced out of the system. This will not be a quick or easy process.

"The chaos in financial markets has now inevitably begun to impact the real economy around the world. Short-term concerns are no longer about inflation but about the spectre of deflation. Unemployment is set to rise in many economies and the financial sector has been hit hard in this respect."

Richemont's operating profits rose 14% in the six months to end-September to ¤639 million (£547.4 million).

However, its after-tax profits, which included its share of tobacco giant BAT's profits, were ahead by only 5% at ¤864 million. The BAT stake was demerged from Richemont last month.

Within the group Richemont said jewellery sales rose by 11%, watches by 12% and pens by 1%.

But leather goods and other accessories, which includes Alfred Dunhill and Lancel, saw a 5% fall in sales and made a small operating loss. Fashion label Chloe saw a sharp fall in sales and profits.

Rupert could not give guidance on expectations for sales in the run-up to Christmas.

But he was positive on the long-term, saying Richemeont "will certainly survive the difficulties that we are facing today".