Cartier to raise prices in euro zone after Swiss franc soars

Tuesday, 27 January 2015 01:24 - - {{hitsCtrl.values.hits}}

GENEVA (Reuters) - Richemont’s flagship Cartier brand will increase prices for watches and jewelry by 5% in the euro zone to limit the damage to its margins following the surge in the Swiss franc. Swiss companies have warned of a plunge in exports, tourist revenues and profits after the country’s central bank last week scrapped its cap on the Swiss franc, sending the currency soaring up to 30%. Cartier, the world’s leading watch and jewelry brand in terms of sales, sits alongside other brands within Richemont such as Van Cleef & Arpels, Piaget and Montblanc, and contributes more than 60% of group profits. “We are going to raise prices by 5% in the euro zone. This applies to both jewelry and watches, but we are keeping prices in Switzerland stable,” Cartier Chief Executive Stanislas de Quercize told Reuters at a watch fair in Geneva on Tuesday. Richemont’s investor relations team said the group’s watch and jewelry brands would raise prices across the board in “mid-single digits” in the euro zone. Senior Richemont executives at the fair said the increase would be 5-7%, in line with analysts’ expectations. “This will put significant pressure on our costs in Swiss francs,” one of the Richemont senior executives said about the currency’s surge. Some analysts estimate around half of the group’s total costs are in Swiss francs.

Richemont operates in the luxury end of the watch market, selling timepieces for as much as 1 million euros ($1.2 million). Its controlled response to the franc’s leap contrasts to the howl of anguish from Swatch Group Chief Executive Nick Hayek who labeled the SNB move a “tsunami”. Cartier is estimated to make around 20% of revenues in the euro zone while for the Richemont group overall, it is closer to 25%. Quercize said he did not rule out further price increases and looking ahead, he was confident about Cartier’s performance this year, partly thanks to the launch of new products. He was also encouraged by improved local European demand. “We had a good year-end in Europe.” At the fair, Cartier unveiled its first new watch collection since Ballon Bleu eight years ago, called Clé, featuring a new shape of round cases, roman numbers and automatic movements. The watches cost between 13,000 and 825,000 euros. Quercize said the new collection was well received, intimating it would boost sales in 2015. Cartier’s watch revenues have been hit hard by China’s anti-corruption drive and the lack of new models was a concern for investors. Julien Marchenoir, marketing director at Vacheron Constantin, a Richemont brand celebrating its 260th anniversary this year, said the luxury industry was going through a period of volatility. He said the attacks in Paris this month risked further spooking tourists. Francois-Henry Bennahmias, chief executive of Audemars Piguet, said his outlook for 2015 had changed since December. “We thought we were going to do much better in 2015. Now we don’t really know any more,” said the head of one of Switzerland’s biggest family-owned watchmakers.