‘This is not a pause, it’s a reset’ – Johann Rupert

The chairman of Swiss watch empire Richemont poured cold water on the luxury industry’s hopes of a quick rebound from the coronavirus, warning of “grave economic consequences” that could last three years.

The reality check from Johann Rupert, who earned a reputation for bearishness with downbeat forecasts before the 2008 financial crisis, contrasts with a more optimistic outlook from industry leader LVMH, which has said it expects to see signs of a recovery within weeks.

Even after consumers emerge from lockdown, changes in spending patterns will persist, he said.

“I’m very concerned about the global economy, and concerned that many politicians are promising things that are not deliverable,” Rupert said on a call. “It’s not a pause; it’s a reset.”

The maker of IWC Schaffhausen watches, Cartier jewelry and Montblanc accessories said it’s impossible to make any meaningful forecasts for Richemont’s own business after operating profit fell 22% in the 12 months through March. The shares fell 1.2% early Friday in Zurich.

The Swiss watch industry is bracing for the worst year in decades, as exports may drop a record 25% in the best-case scenario in 2020, Vontobel analyst Rene Weber has estimated. Watches and jewelry tend to be harder hit in economic crises than fashion and leather goods.

Along with other luxury companies, Richemont reported signs of recovery in China in recent weeks. But domestic shopping won’t be enough to provide a return to growth, given the importance of mainland consumers’ overseas spending.

With most flights grounded and Chinese tourists who have fueled sales of high-end goods largely stuck at home for the coming months, the outlook for travel-related retail is bleak. Warnings of possible quarantines for visitors to countries such as the U.K. worsen the outlook further.

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‘This is not a pause, it’s a reset’ – Johann Rupert