【Switzerland】Richemont: This Luxury Conglomerate Even Challenges LVMH

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Editor’s Note

This article examines the recent surge in Richemont’s stock, which has outperformed its European luxury rivals. The analysis highlights the conglomerate’s resilience and its significance for investors, particularly in the context of the crucial Chinese market.

Hinter Richemont steckt unter anderem die Marke Cartier.
What Richemont Is

Richemont, the Swiss-based conglomerate behind brands like Cartier, Van Cleef & Arpels, and Piaget, is currently experiencing a golden moment.
The company’s stock has risen more than 20 percent since the beginning of the year, outperforming both LVMH and Kering (which owns brands like Gucci and Saint Laurent). This is a boon for investors seeking assurance that the era of European luxury stocks is not over—particularly in China.

Why Cartier Is Performing So Well Now
“In difficult times, like the ones we are currently experiencing in the luxury sector, there is a tendency to buy less but buy better,” Erwan Rambourg, global co-head of consumer and retail research at HSBC, told Business Insider. “If at the end of the day you only have to buy one piece of jewelry from a jeweler, it will be Cartier.”

In the first quarter of this year, Richemont’s largest brands all recorded positive growth in Google Trends and an increase in website visits, according to a JPMorgan report from May. In contrast, brands like Louis Vuitton and Gucci saw declines in both areas.
Even LVMH CEO Bernard Arnault has taken note.

“In the competition, there is a very good group, the Richemont group,” he said in January, praising the group’s chairman, billionaire Johann Rupert. “We consider Rupert an excellent leader. And I have not the slightest desire to disturb his strategy.”
All That Glitters Is Gold

Unlike luxury conglomerates LVMH and Kering, Richemont is disproportionately focused on hard luxury—literally items made from hard materials like gold, gemstones, and diamonds. In fiscal year 2024, jewelry accounted for 69% of sales and watches for 18%.

Cartier-Produkte haben ein zeitloses Design – hier am Handgelenk von Prinzessin Diana.

It’s a good time to be in this business. In difficult macroeconomic times or when people are under pressure, they are more likely to spend money on something they know will retain its value, like metals and gemstones, than on something less durable and more trend-driven, like clothing or handbags.

“In times of economic crisis—I’m not saying everyone runs out and buys a Cartier watch or a Van Cleef & Arpels necklace—but they are a safer choice,” said Fflur Roberts, head of global luxury goods at Euromonitor, to Business Insider.

Part of the reason is that a classic Cartier piece—like the rectangular Tank watch launched in 1919 or the three-band Trinity ring that debuted five years later—is unlikely to go out of style. The Love collection, a Cartier classic with a screw motif, has been around for five decades and still accounts for more than 20 percent of the company’s sales, according to HSBC’s Rambourg.

“The fashion risk here is not as high as, for example, in apparel and even in leather goods,” Jelena Sokolova, senior equity analyst at Morningstar, told BI about the fine jewelry business. “All of this favors the established brands: Cartier and Van Cleef.”

Jewelry is also a good investment. A 2022 study by Credit Suisse and Deloitte described jewelry and watches as “safe havens” in “uncertain times,” with steady single-digit returns and low volatility.

“The world could end, and your piece of jewelry could still be worth something,” said Rambourg.
“If people want to put their money into other, more traditional financial investments, then jewelry is an area they invest in,” said Euromonitor’s Roberts. She added, “It’s safer to spend a little more and buy a real luxury brand like Cartier.”
China Cha-Ching

Last month, rumors circulated that Van Cleef planned to raise its prices in China—and chaos ensued. Local news…

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⏰ Published on: July 17, 2024