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Richemont not planning further price changes for now

Visitors look at new models on the Cartier stand at the "Salon International de la Haute Horlogerie" (SIHH) watch fair in Geneva January 19, 2015. REUTERS/Denis Balibouse

By Astrid Wendlandt

PARIS (Reuters) - Cartier-owner Richemont said it was not planning any further price adjustments in the immediate future as it posted an 8 percent drop in April sales at constant exchange rates and revenue remained flat in the first two weeks of May.

The world's second largest luxury group, which also owns jeweller Van Cleef & Arpels and watchmakers Piaget and IWC, said on Friday trading remained difficult in its big markets of Hong Kong and Macau.

In response to the weakness of the euro and the strength of the US dollar, Richemont raised prices in the euro-zone and cut them in Asia but no further changes were planned for now.

"We are now where we want to be," Chairman Johann Rupert said in a conference call with journalists.

Richemont said April sales were affected by weaker wholesale orders in Asia in expectation of price cuts in May but the situation had since "normalised" and "in the first two weeks of May, sales were flat at constant exchange rates."

"The minus 8 percent headline in April for Richemont does not help but it's not as disastrous as the headline suggests, we think," JP Morgan wrote in a note saying the drop was mainly due to the price movements.

Richemont said its cost base had increased following the sharp appreciation of the Swiss franc earlier this year. But the group, which employs 8700 staff, said moving employees out of Switzerland was not an alternative.

Instead, it said it was implementing belt-tightening measures and group executives had taken a pay cut to help them negotiate salary readjustments with staff.

Richemont did not give a precise guidance for the year but said it expected gross margin to be around 65 percent.

Asked about the recent launch of the Apple watch, Rupert said Richemont was not planning to fit watch cases with technology.

"I have some reservations about technology... You buy something and two years later it is obsolete," Rupert said. However, he said technology in straps remained a good idea.

The group launched a Montblanc watch earlier this year with a strap fitted with technology.

Richemont's net profit for the year to March 31 fell 35 percent to 1.334 billion euros (950 million pounds), as previously announced last month.

Richemont shares, which had lost 3 percent since the beginning of the year, were down around 2 percent in morning trade.

(Reporting by Astrid Wendlandt; Editing by Susan Thomas and Keith Weir)