UPDATE 4-Richemont misses forecasts, sees no upturn

Mon Jan 19, 2009 6:23am EST

* Richemont Q3 sales miss forecasts

* Does not see any short-term improvement

* Shares fall nearly 4 pct, weigh on luxury sector

(Recasts, adds company comments, details, analyst comment, updates shares)

By Katie Reid

ZURICH, Jan 19 (Reuters) - Richemont (CFR.VX), the Swiss maker of Montblanc pens and Cartier watches, said on Monday it saw no signs of a recovery and planned to cut spending after third-quarter sales missed forecasts.

The world's second-largest luxury specialist behind LVMH (LVMH.PA) and the first group in the European sector to give a Christmas trading update said it was facing the worst markets since it was formed two decades ago.

The news dragged down Richemont shares nearly 4 percent and sent ripples across the European luxury goods sector, causing LVMH and PPR (PRTP.PA) stock to fall nearly 4 percent at one point and Swatch (UHR.VX) some 5 percent.

"Given the current economic climate ... we must assume that there will be no significant recovery in the foreseeable future," Richemont said in a statement with a spokesman adding the short-term outlook was bad.

Consumers are keeping their purse strings tight on concerns about job security and the global economy.

Earlier this month, U.S. jeweller Tiffany & Co (TIF.N) cut its profit forecast, said it was reviewing costs and saw these conditions persisting well into 2009. [ID:nN14286147].

"We are putting unnecessary capital expenditure on hold and we are delaying expenditure on expanding production," said a Richemont spokesman, adding the group would consider cutting jobs but no decision had been taken yet.

Richemont, which makes Jaeger-LeCoultre watches and Lancel handbags, generated revenues of 1.552 billion euros ($2.06 billion) in the three months to Dec. 31, down 12 percent at constant exchange rates.

The peformance came below the average estimate of 1.66 billion euros in a Reuters poll of 15 analysts.

At current exchange rates, third-quarter revenues fell 7 percent.

WORSE THAN FEARED

"The severity of the slowdown exceeded even our conservative expectations," Bernstein said in a note.

"Given the deteriorating demand backdrop, we continue to believe that Richemont remains at a disadvantage relative to other luxury names in our coverage," it said adding that Richemont had higher fixed costs than its rivals and was more dependent on wholesale distribution.

Richemont trades at around 7 times expected 2009 earnings, at a discount to French rival LVMH (LVMH.PA) which is on 9.6 times.

On Friday, Bernstein forecast a more than 10 percent drop in global luxury sales in 2009, against a 5-7 percent decline previously.

Analysts said they were particularly surprised to see that sales in Asia, traditionally a hub of growth, had declined 2 percent during the period - in spite of a 24 percent rise in mainland China.

"The figures from the Asia-Pacific region point to a collapse outside of China," Kepler Capital Markets analyst Jon Cox said.

Demand also slumped in the Americas and Europe, with sales falling 28 percent and 9 percent respectively at constant exchange rates.

Sales in jewellery, which includes brands such a Van Cleef & Arpels, fell 12 percent at constant exchange rates and 7 percent at current rates while pen sales dropped 17 percent at constant exchanges rates.

"The volume of sales.... has fallen from the peak of 2008 back to the level of 2006," a Richemont spokesman said.

Richemont said the downturn did not mean it was more keen to make acquisitions than before.

"We would continue to be interested in component manufacturing as we have been in the past," a spokesman said. (Editing by Astrid Wendlandt and David Cowell) ($1=.7543 Euro)

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