SWITZERLAND. Richemont executive chairman Johann Rupert is taking command to impose a historic change of direction at the world’s leading jewellery and watch group.
The aim is to shake up current management, reorganise a complicated structure broken up into five decision-making areas around the world, and cut at least -20% of management costs. The costs are the weak link in a company that closed last year’s balance sheet with net profits down -22% to €642 million (US$706 million).
The profits decline reached -46% at operating level, prompting Rupert, the largest shareholder, to personally take the reins of the group. The move will occur formally in October, when current ceo Alain Dominique Perrin will leave his position, after having announced his resignation in May (The Moodie Report, 7 May 2003).
”Some very wrong decisions were taken,” Rupert said recently, referring to the weak performance of fashion brands Lancel and Dunhill, but also Cartier. Sales overall slumped by -5% last year and sales at the group’s jewellery houses slumped -8%.
At Cartier, Franco Cologni has been brought back by Rupert, after four years away from operating positions in the group. Cologni believes Cartier has been weighed down by a 2000 decision to raise the exclusiveness of its products, at a time when demand in the sector was about to decline.
”Rupert had foreseen the slowdown,” said Cologni speaking to Pambianco News, ”but he wasn’t listened to.”
The alarm was ignored to the point where, in 2000, Richemont paid for LMH watches close to €1.2 billion (US$1.3 billion). “We paid +50% too much for them,” maintain Rupert and Cologni. The value of LMH was written down to zero in the balance sheet presented on 5 June 2003 with new EU accounting criteria.
The market has changed. The way Richemont will restructure, Codogni said, ”will be clear later in the year.”
