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Luxury goods makers start to feel chill of recession
Elizabeth Rigby and Norma Cohen in London and Adrian Michaels in Milan | January 25, 2008
Richemont, the world's second largest luxury company, said on Wednesday that underlying growth slowed to10 per cent in December - against 14 per cent for the full quarter - as demand waned in the world's two biggest economies.
The news sent shares in the maker of Cartier watches and Montblanc pens down 6.65 per cent to SFr58.25. The group narrowly missed forecasts with an 8 per cent rise in group sales to euro 1.67bn ($2.56bn).
Coach (NYSE:COH) , the largest US maker of designer handbags, added underlying sales in its US retail stores had fallen during the second-quarter, down 1.1 per cent. The drop in same-store sales in 2007 compares with a 25.7 per cent increase in the holiday period in 2006. Coach said the drop in transaction sizes had been "unexpected".
Lew Frankfort, Coach chief executive told Reuters news agency: "My own view is that we're already in a consumer recession.
"We do need a tax stimulus package," he added, suggesting that this week's 75 basis points cut in the US Federal Reserve's benchmark Fed Funds rate was not enough to boost spending.
Armani, which is private, said on Wednesday that 2007 had been another positive year and had continued the growth seen in 2006. A company official said it was too early to tell whether the stock market declines of recent days would have an effect.Two pillars of Italian luxury - Prada and Salvatore Ferragamo - are pressing ahead with plans to list on the Milan stock exchange although bankers pointed out that they would wait until nearer the time of the listing to change their minds if demand and valuation were lacking.