Richemont, second only to France's LVMH in the luxury world, posted a net profit of 1.2 billion euros during its 2016/2017 fiscal year — down 46 percent from a year earlier.

Its sales meanwhile slumped to 10.6 billion euros, down from 11 billion during the previous 12-month period.

A drop in profits had been expected, since the results the company announced a year ago were padded with 639 million euros from the merger of its online sales platform Net-a-Porter and an Italian counterpart, Yoox.

But the fall was steeper than expected, with analysts polled by Swiss financial news agency AWP expecting the company to post a net profit of 1.3 billion euros on sales of 10.7 billion.

“The past year posed challenges for Richemont,” company chairman Johann Rupert acknowledged in a statement, pointing especially to “changes in demand, which particularly affected our watch businesses”.

The luxury watch sector has seen tough times since Chinese authorities banned giving expensive gifts as part of an anti-corruption crackdown in 2013, followed by democracy protests in 2014 hitting sales in Hong Kong.

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Faced with dwindling demand, Richemont has cut staff and also repurchased inventory from shops to help them remove models struggling to find buyers from display cases and make room for new collections.

The company, which owns top global brands such as Jaeger LeCoultre, Van Cleef & Arpels and IWC, saw its watch sales slump 11 percent during the past fiscal year, which ended on March 31st.

Its operating margin meanwhile was more than halved to 7.8 percent due to its repurchasing of inventory and efforts to scale back its production capacity.

Following the announcement, Richemont saw its share price drop 4.15 percent to 81.75 Swiss francs (75 euros) a piece in early afternoon trading, as the Swiss stock exchange's main SMI index inched up 0.23 percent.