While Richemont Sales Beat Expectations, its Leadership Crisis Ensues

GENEVA,  Switzerland — Richemont said sales rose more than expected in the five months to August 31 on a recovery in Asia, but the luxury goods group gave no word on a replacement for its watchmaking division after the departure of an executive touted as a potential future chief executive.

Lack of news on a successor to Georges Kern, seen as one of the group's most promising managers, coupled with the move to an unconventional management structure late last year, means executive chairman Johann Rupert will likely face questions from fellow shareholders over the current leadership crisis at its annual general meeting on Wednesday.

Kern left to work for competitor Breitling in July after just four months as head of Richemont's struggling watch business, which owns brands such as IWC and Jaeger-LeCoultre.

The fact that no successor has been appointed so far shows there may be no suitable candidate inside the group that owns the Cartier brand and outsiders may be reluctant to take on the challenging task.

The world's number two luxury goods group and its rival Swatch Group are emerging from a long period of declining sales caused by the collapse of the Hong Kong market and fewer Chinese tourists travelling to Europe's luxury shopping centres.

Sales in the five months from April to August jumped 12 percent at constant currency, Richemont said in a statement published ahead of its annual general meeting in Geneva later.

This was ahead of an estimate for a 10 percent rise in a Reuters poll. A 10 percent sales rise at actual exchange rates also beat expectations.

Asia Pacific experienced a strong recovery, with 23 percent constant currency sales growth, but Richemont said this was partly due to stock buybacks in its watch business in the year-ago period. Without this one-off effect, constant currency sales for the group increased 7 percent, Richemont said.

"The trend is good, watches sell out in Asia and Hong Kong is turning positive — but this is more of a step by step progress than a V shaped recovery," Exane BNP Paribas analyst Luca Solca said.

Shares in Richemont fell 2.2 percent in early trade.

By Silke Koltrowitz; editors: John Revill and Louise Heavens.