Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Richemont chair Johann Rupert said he expected the US to swiftly reduce punishing tariffs on Swiss exports, after joining a business delegation to the White House that helped break months of deadlock between Bern and Washington.
“The signs are that the misunderstanding has been cleared up. I think it will be resolved [as soon as] this week,” Rupert said at the Cartier owner’s second-quarter update on Friday, calling the tariffs “potentially devastating for the whole of Switzerland”.
In August, the Trump administration hit Switzerland with a 39 per cent tariff, the highest imposed on any developed economy, citing America’s $39bn trade deficit with Switzerland as justification. Import duties now total about 44 per cent for Richemont once existing duties are included.
Despite the imposition of tariffs Richemont’s sales beat expectations in the second quarter, driven forward by high demand in the Americas. Group sales grew 14 per cent at constant exchange rates for a total of €5.2bn, with double-digit growth in every region. The luxury group’s shares rose by 7.8 per cent in early trading.
Rupert was joined at the White House last week by executives from Rolex, Richemont, Mercuria, Partners Group, MSC and MKS PAMP. He said they travelled to Washington to convey the damage the tariffs were causing, adding that he hoped they would be reduced to 15 per cent.
“It is an enormous privilege to have access to the most powerful man in the western world — and probably the world,” he said. “I’ve got lots of people whose lives would have been badly affected, not just colleagues but other industrialists living in Switzerland.”
“We did not negotiate with the White House,” Rupert added. “There was no mandate to negotiate. We believe [the Swiss government representatives] are doing a good job.”
US tariffs only had a €50mn negative impact on the Swiss group in the first half of the year because it had pre-existing inventory in the US. But chief financial officer Burkhart Grund said the hit would be much steeper in the second half if a deal is not reached as Richemont will be forced to import more goods.
Demand for the group’s jewellery brands, including Cartier and Van Cleef & Arpels, helped group sales grow by 17 per cent in the quarter. Revenues generated by Richemont’s watchmaking division — which have suffered from a market slowdown in Asia — returned to growth at constant exchange rates in the quarter.
“Richemont is a fundamentally stronger business than in the past,” wrote Citi analyst Thomas Chauvet, who noted that its shares have outperformed the rest of the luxury sector this year.
“[It has] greater scale, more balanced product [and] geographic mix, shorter production lead times, tighter control over distribution, cleaner wholesale inventories, stronger balance sheet and strengthened management team [and] governance,” he added.
Despite indications from across the luxury industry that demand in China has stabilised, Rupert said he remained cautious on a recovery in the country, where demand has suffered amid weak consumer confidence.
Richemont’s chair also said the nature of the country’s previously buoyant luxury market had changed.
“We believe the Chinese clientele is becoming more selective and it may remain so even upon a full recovery,” he said. “We’re seeing some early signs but I wouldn’t say that they are green shoots of recovery.”