Editor’s Note
Amid broader sector uncertainty, Richemont’s focus on high-end jewelry appears to be a key strategic strength, setting it apart from peers facing softer demand.
Richemont defies the general uncertainty in the luxury sector mid-week. While classic fashion houses are suffering from weak demand, analyst and competitor data signal remarkable strength in the jewelry business. The focus on “Hard Luxury” proves to be a crucial advantage in this market environment.
JP Morgan sees potential up to 200 CHF.
Jewelry divisions are growing significantly faster than fashion.
High gold price is considered manageable.
The US bank JP Morgan today reaffirmed its buy recommendation for Richemont. Analyst Chiara Battistini maintains the price target unchanged at 200 Swiss Francs (CHF). With the current price of around 160.78 CHF, the experts thus attribute a further jump of about 24 percent to the stock.
The analysts are thus rewarding the year-to-date performance of over five percent gain. The confirmation underscores the expectation that the group can further increase its valuation despite the already occurred rise.
Important impulses were provided yesterday by the figures of competitor Kering. Although the French giant is struggling with a massive profit slump in its fashion division, the jewelry segment stood out positively. Brands like Boucheron achieved double-digit growth rates.
Can the group permanently leverage this divergence to decouple from the volatile fashion market? While brands in the “Quiet Luxury” segment grapple with weakness in China, the pricing power for exclusive jewels seems unbroken.
The recent rise in the gold price to over $5,050 per ounce is sparking market discussions about margins. However, the analysis firm Bernstein yesterday classified the rising costs as “manageable.” Richemont apparently has sufficient brand strength to pass on higher raw material costs to customers through price increases.
The relative strength compared to broadly diversified luxury conglomerates is solidified by the robustness of the jewelry market. In the coming quarters, achieving the price target of 200 CHF will primarily depend on whether the demand for “Hard Luxury” can continue to compensate for the weak performance of the global fashion industry.