(Bloomberg) -- Richemont reported a surprise drop in revenue from its watch business, with protests in Hong Kong cutting sales in that key luxury market for the owner of Cartier.

The watch unit’s sales slid 2% excluding currency shifts in the three months through June, the Geneva-based company said Thursday. The stock fell as much as 3.8%, trimming its gain this year to 34%.

The report comes after other luxury and watch companies, Burberry Group Plc and Swatch Group AG, announced better-than-expected results, raising the bar for the sector. Richemont’s watch brands have suffered from excess inventory, and the company has been buying back unsold products from the market since 2016. Richemont echoed Swatch in saying that protests in Hong Kong, the top export market for Swiss watches, weighed on sales due to store closures and lower tourist arrivals.

“It’s a sales miss and a sales miss is never good news,” said Eleanor Taylor Jolidon, who manages $2.5 billion at Union Bancaire Privee in Geneva.

The company also said first-quarter watch sales were more subdued because it’s introducing most of its new timepieces this year in the current quarter. It’s also been trimming its distribution network in an attempt to make its products scarcer, leading to a 2% drop in wholesale watch revenue.

Switzerland’s exports of timepieces dropped 11% in June, the Federation of the Swiss Watch Industry also said Thursday. Shipments to Hong Kong declined 27% in June and dropped 6.6% in the first half. Even before the protests started last month, that market had been weakening as China tries to boost luxury consumption on the mainland.

The shift from sales from Hong Kong to China is negative for luxury-good makers because typically their margins are higher in Hong Kong due to lower taxes.

Richemont had net cash of 2.4 billion euros ($2.7 billion) at the end of the quarter.

(Updates with shares in second paragraph.)

--With assistance from Albertina Torsoli.

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Thomas Mulier, Marthe Fourcade

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