Richemont Abolishes CEO Role Amid Biggest Shakeup in Years
(Bloomberg) -- Richemont, the owner of Cartier jewelry and IWC watches, will abolish the CEO position as part of the most sweeping management overhaul in years amid plummeting sales of luxury timepieces and leather goods.
Chief Executive Officer 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 Friday. Brand chiefs will report directly to the board, Chairman Johann Rupert said. Investors welcomed the move, sending the stock up as much as 9.4 percent in Zurich despite a 43 percent plunge in first-half profit.
“One individual cannot be held responsible, it’s unfair,” said 66-year-old Rupert, 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 shakeup 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 a chief executive 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 their CEO this year include Burberry Group Plc and Kering SA brands 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. Board members including former CEO Norbert Platt will also retire. Deputy CFO 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 AG. Luca Solca, an analyst at Exane BNP Paribas, deemed it a “generational change.”
For analyst views on Richemont, click here.
Amid the changes Rupert remains the steady hand at Richemont, which he founded in 1988 along with his late father Anton, who made a fortune setting up Rembrandt Tobacco Corp. A university dropout, Rupert is South Africa’s richest man with a net worth of $6.5 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 Inc. to spearhead his company’s digital push. The French company’s TAG Heuer brand has also opened an office in Silicon Valley. Richemont plans to boost digital marketing and e-commerce via the transitions, Rupert said.
Rupert’s son, Anton Jr., 28, attended the analyst meeting at Richemont’s Geneva headquarters. Exane’s Solca said Rupert is “certainly” preparing his son for a board seat.
“Although a few of my co-directors have asked me about my son, we haven’t discussed it yet, it’s a bit embarrassing as he’s sitting in the room,” Rupert said. The board has agreed any position he would have would be non-executive, the chairman said.
Richemont’s new management team will face the difficult task of turning around its lackluster performance. Operating profit declined to 798 million euros ($885 million) in the six months through September as the Cartier maker 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 will reduce production of watches and needs to slim down through natural attrition, Rupert said. The company isn’t planning job cuts, but is considering a hiring freeze and has been closing boutiques in less important locations in China, executives said. Underperforming brands need to be fixed or sold, Rupert said.
“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 percent of total revenue, declined 8 percent, weighed down by inventory buybacks. Sales of fashion and accessories brands like 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 on a call with analysts.