Rupert calls time on Richemont bosses
RICHEMONT, the owner of Cartier jewellery and IWC Schaffhausen timepieces, unveiled the most sweeping management overhaul in years in response to plunging sales of luxury watches and leather goods.
CEO Richard Lepeu, 64, and chief financial officer Gary Saage, 56, will retire next year, eight directors will step down and new managers will lead watchmaking and operations, the Swiss company said on Friday.
The CEO role would be abolished, with brand chiefs reporting directly to the board, chairman Johann Rupert said.
Investors welcomed the move, sending the stock up as much as 7.8% in Zurich despite a 43% plunge in first-half profit.
“One individual cannot be held responsible, it’s unfair,” Rupert said, referring to the roughly three-dozen units that make up the sprawling company. “We will never have a similar CEO again. Now it’s time for us to start looking at another generation.”
It’s the biggest shake-up at Richemont since 2009, when Rupert returned for a third spell as CEO to steer the company through the financial crisis. The decision to do away with the position could consolidate power in Rupert’s hands, and marks a more significant step than other reshuffles the luxury and fashion sectors have experienced this year.
Companies that have changed CEOs this year include Burberry and Kering’s Balenciaga and Bottega Veneta.
Georges Kern, who leads Richemont’s IWC brand, will become head of watchmaking, marketing and digital. Montblanc CEO Jerome Lambert will be head of operations. Rupert, the company’s controlling shareholder, will remain executive chairman. Deputy chief financial officer Burkhart Grund will replace Saage.
“To a degree, it’s ‘in with the new’, given the format of the new team and their responsibilities,” said John Guy, an analyst at MainFirst Bank.
Luca Solca, an analyst at Exane BNP Paribas, deemed it a “generational change”.
Amid the changes Rupert remains the steady hand at Richemont, which he founded in 1988 with his late father Anton, who made a fortune setting up Rembrandt Tobacco. A university dropout, Rupert is South Africa’s richest man with a net worth of $6.5-billion (about R88.24-billion), according to the Bloomberg Billionaires Index.
The shift comes as luxury goods makers seek to attract younger clients who increasingly shop and discuss brands online. LVMH chairman Bernard Arnault has hired a senior executive from Apple to spearhead his company’s digital push. The French company’s TAG Heuer brand has also opened an office in Silicon Valley.
Richemont planned to boost digital marketing and e-commerce through the transitions, Rupert said.
Richemont’s new management team will have to turn around its lacklustre performance. Operating profit declined to à798-million (about R12-billion) in the six months to September as the maker of Cartier bought back timepieces that weren’t selling at retailers. The Swiss watch industry is suffering its longest slump in exports since monthly records began in 1988.
Richemont would cut production of watches and needed to slim down through natural attrition, Rupert said. It is considering a hiring freeze and has been closing boutiques in less important locations in China. Underperforming brands will be fixed or sold.
“Watches still remain an area of pain,” wrote Mario Ortelli, an analyst at Sanford C Bernstein.
Sales in all of Richemont’s main regions declined, with the biggest drops in Europe and Japan. Sales in Asia Pacific, which accounted for 35% of total revenue, declined 8%, weighed down by inventory buybacks. Sales of fashion brands such as Chloe and Alfred Dunhill also declined in the quarter. One bright spot was mainland China, which continued to improve. October sales were “modestly positive”, Saage said.
We won’t have a CEO again. It’s time to look at another generation