Richemont Hires Wikstrom to Revive Dunhill, Fashion

Source from:  Bloomberg 04/01/2009

Cie. Financiere Richemont SA, the second-biggest luxury company, said it will hire Martha Wikstrom to develop its leather, fashion and accessory brands as it seeks to eliminate losses in brands such as Dunhill and Lancel. "This will ensure that they are well placed to benefit once the global economic climate picks up," Chairman Johann Rupert said today by e-mail. "There is no intention to restructure or to spin out these assets." Richemont's fashion and leather brands have lost increasing amounts of money, with figures released last fall showing the units had a 15 million-euro ($19.8 million) operating shortfall in the six months to September and a 5 percent decline in sales. The market has since worsened, with Italy's Altagamma luxury- goods industry association today predicting the U.S. will lead a "significant decline" in global sales. Wikstrom, a former Nordstrom's Inc. and Harrods executive who sits on Geneva-based Richemont's board, will oversee the leather, fashion and accessory brands, though not its jewelry or watch businesses which include Cartier and Jaeger-LeCoultre. "Dunhill and Chloe are well-known brands, but not as strong as others, such as Gucci or LVMH or Hermes," said Thomas Deitz, an analyst at ABN Amro Bank NV. "So they need a multi- year phase of significant investment. Managing that crucial phase will be Wikstrom's hardest task. This involves as well attracting top designer talent and re-positioning the brands in order to attract the desired clientele." Clothing Brands Richemont shares fell 75 centimes, or 4.2 percent, to 17 francs in Swiss trading. The stock has lost 16 percent this year, a worse performance than its two closest rivals. LVMH Moet Hennessy Louis Vuitton SA, the world's biggest luxury-goods company, has slipped 5.1 percent, while Gucci and Yves Saint Laurent owner PPR SA has added 1.2 percent. Wikstrom, a 52-year-old American, joined Richemont's board in 2005. She runs Atelier, her own investment fund, and earlier this decade was managing director of Harrods, departing the London-based luxury retailer in 2003. Profit from clothing brands such as Chloe and other non- leather businesses fell 64 percent to 5 million euros, Richemont said in November. Chloe's fortunes have soured since the brand was revived a decade ago by Stella McCartney and her successor, Phoebe Philo. Richemont froze the label's planned new store openings in November, when it also said the brand's six-month operating profit fell. Hannah MacGibbon was named Chloe's head designer last year and is expanding the label's shoe business. Dunhill Prices "What we see in moments like these is that consumers converge on the strongest brands, like Vuitton and Gucci," Luca Solca, an analyst with Sanford C. Bernstein who rates Richemont "market perform," said by phone. "It's very important for them to show they are doing something about the brands and can contrast the losses with management actions and new appointments." Dunhill, a menswear brand that lost 9 million euros in the six months to September, hired designer Kim Jones as creative director last year. Richemont has been trying to raise prices and quality for Dunhill leather bags and doubled its advertising and promotional spending, investor-relations chief Sophie Cagnard told analysts in November. South Africa's billionaire Rupert family used cash from their tobacco interests to found Richemont in 1988, creating the world's biggest jeweler through acquisitions. Separately, Rupert denied a report on the Business Montres Web site that said Richemont will replace Jerome Lambert, chief executive officer of its Jaeger-LeCoultre watch brand. "Jerome is one of our most highly regarded and successful managers and we very much regret the offensive comments made in the article," Rupert said. Lambert, speaking by telephone, denied a report on the same Web site that said Richemont plans to fire 180 people. Enditem