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Luxury watch maker Patek Philippe likes to boast that its wearers never own their timepieces, they merely look after them for the next generation.

Rival luxury-goods maker Richemont has brought that tradition to the boardroom with the proposed appointment of founder and chairman Johann Rupert’s 29-year-old son Anton as a director.

Such governance trifles are unlikely to bother shareholders so long as a rebound in watch sales materialises.

On Friday, Richemont, the owner of the Cartier and Montblanc brands, announced that these sales had fallen 11 per cent in the past financial year.

It did, however, point out that if it excluded the watches and other baubles it destroyed to help refresh inventory then overall sales would have declined by a modest 2 per cent instead of double that. As a management strategy, though, junking your own goods is unlikely to catch on.

No matter. Pre-tax profits may have declined by nearly a quarter but Richemont can flash the cash.

Since 2015, dividends have risen 12 per cent — even though the company’s operating profits fell by nearly €1bn and discretionary cash has fallen steadily. The result is that the latest dividend is just covered by free cash flow.

Shares dipped on the day but remain well up on the year. The relative imperviousness of the luxury sector, especially at the wealthiest end, to economic peaks and toughs is well-established. With net cash rising to €5.8bn, 14 per cent of its market capitalisation, Richemont can afford a tough year or two.

However, peer LVMH, which trades at a discount to Richemont, is doing better. It reported sales growth across watches and jewellery in its latest results; Richemont merely pointed to a deceleration in declining sales.

Bauble-shopping shareholders should shop elsewhere until damped demand reverses.

Copyright The Financial Times Limited 2017. All rights reserved.
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