November 10, 2017 / 6:22 AM / a year ago

Richemont appoints insider to speed up watch business recovery

ZURICH (Reuters) - Luxury goods group Richemont (CFR.S) appointed company veteran Jerome Lambert on Friday to the newly created role of chief operating officer to steer its watchmaking business into calmer waters as demand for its timepieces slowly improves.

FILE PHOTO - The logo of luxury goods group Richemont's flagship brand Cartier is seen at a branch in Zurich, Switzerland, January 12, 2017. REUTERS/Arnd Wiegmann

The appointment had been keenly awaited since July when one of Richemont’s most promising management talents, Georges Kern, chosen just months earlier to put brands such as Piaget and Vacheron Constantin back on track after a severe downturn, left to join competitor Breitling.

“We now have the management structure in place that we need to meet the challenges,” Burkhart Grund, who took over as chief finance officer in August, told reporters on a call.

By choosing Lambert, a 20-year Richemont veteran who has successfully managed the group’s Jaeger-LeCoultre and Montblanc labels, the world’s second biggest luxury group took a safe option, analysts said.

“Lambert is the most solid candidate to become at one point CEO,” Exane BNP Paribas analyst Luca Solca wrote, while Citi’s Thomas Chauvet said Lambert had been given a “quasi CEO” role.

Richemont has not had a chief executive since Richard Lepeu retired earlier this year, but is steered by a senior executive committee that includes Lambert and now also a newly appointed head of watch brand distribution, Emmanuel Perrin, who will assist Lambert in repositioning the watch business.

The task should be made easier by improving demand, reflected in solid results for the six months to Sept. 30 that were pre-released last month and published in detail on Friday.

Constant-currency sales rose 12 percent, with watch sales up 15 percent, and net profit jumped 80 percent to 974 million euros ($1.13 billion), helped by the non-recurrence of buybacks of unsold watches in the year-ago period.

Sales in its most crucial region, Asia, jumped by a quarter. Britain stood out with double-digit sales growth, aided by the slump in the pound since Britons voted last year to leave the European Union.

Richemont cautioned, however, that it would not be able to keep up the “exceptional level of growth” for the full year.

“We still have a challenging situation in the watch trade due to stock levels. Without the effect of buybacks, watch sales were flat with trade partners,” Grund said.

Shares, up almost 34 percent this year, were down 3.8 percent at 1015 GMT, lagging the European sector index .SXQP.

The group’s operating margin improved to 20.8 percent, from 15.7 percent, but Citi’s Chauvet asked in a note for more clarity on margin drivers.

He said the share valuation at around 26 times forward earnings priced in “an aggressive V-shape earnings recovery scenario over the next three years, which might be overly ambitious in light of limited recovery in watch demand so far”.

Editing by Joshua Franklin, Amrutha Gayathri and Adrian Croft

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