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Richemont revamps management as challenges loom

Luxury goods group Richemont's chief executive and chief financial officer will step down along with nearly a third of its board members next year as it tackles chronic low demand, it announced on Friday.

The Swiss company said its board was making changes in reaction to the challenges that rapidly changing technology brought to traditional business models, as well as the impending retirement of key executives.

Shares in the company were trading 5.4 percent higher at the open of the European markets Friday.

Shoppers pass a Cartier luxury store, operated by Cie. Financiere Richemont SA, in the Galeries Lafayette SA luxury department store in Paris, France.
Bloomberg | Bloomberg | Getty Images
Shoppers pass a Cartier luxury store, operated by Cie. Financiere Richemont SA, in the Galeries Lafayette SA luxury department store in Paris, France.

Swiss watchmakers are grappling with weak demand for pricey timepieces as Chinese shoppers, their biggest customer group, travel less to Europe's luxury capitals for fear of Islamist attacks and, deterred by an anti-graft campaign, also buy fewer watches in Hong Kong.

The Geneva-based group said Chairman Johann Rupert would stay on as the struggling luxury firm restructured the responsibilities of senior management.

It has not yet named a successor to Chief Executive Richard Lepeu, who the group said will retire in March.

Its shares were indicated 0.4 percent firmer in pre-market business.

Kepler Cheuvreux analyst Jon Cox called the news "not really a surprise as the CFO has been wanting to step down for years (and have been market rumours for about a year) although the surprise is it all happens at the same time. But at the centre will remain Johann Rupert, who will remain uberboss and former executives will be hanging around to give advice."

Richemont also said it would address watch overcapacity after net profit nosedived in the six months to September, hit by one-off restructuring charges and product buy-backs.

"Concerning watches, we will look to deal with overcapacity issues, adapting manufacturing structures to the level of demand," the maker of Cartier jewellery and IWC watches said.

Sales fell 12 percent at constant exchange rates to 5.1 billion euros ($5.66 billion), while net profit dropped 51 percent to 540 million euros. The company had issued a profit warning in September.

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