Editor’s Note
This one-year review of Richemont’s stock performance highlights a modest but positive total return for patient investors, driven by a combination of share price appreciation and dividends. While the journey has required resilience, the outcome underscores the value of a steady, long-term approach in navigating market fluctuations.
Investors who entered Richemont about a year ago need strong nerves but will not be disappointed. The stock’s closing price twelve months ago was around 122 CHF. Compared to the recent closing price of around 127 CHF, this represents a price increase of roughly 4 to 5 percent. Additionally, there is a dividend yield of over 2 percent, resulting in a total return in the high single-digit percentage range for patient investors.
However, emotional highs were rarely sustained during this period. At times, the stock had gained significantly more, benefiting from the euphoria surrounding the post-pandemic luxury boom and stronger margins in the jewelry and watch division. Yet, persistent weakness in Chinese demand, currency exchange effects, and a more defensive mood in equity markets pushed Richemont back down. Those betting on quick price gains had to accept setbacks. Long-term oriented investors, trusting in the brand power and balance sheet strength of the group, can, however, record the past year as “solid, albeit volatile.”
In recent days, Richemont has been in the focus of financial markets primarily for two reasons: economic signals from China and the development of the important jewelry business. Several industry reports signaled that luxury growth in the Middle Kingdom has begun to stutter after the strong rebound of previous years. Both international fashion and luxury groups as well as local retailers report subdued customer traffic in the metropolises. This is of central importance for Richemont, as the group generates a significant portion of its revenue from Chinese customers – both domestically and through travel purchases.
At the same time, signals are increasing that the premium segment is significantly more robust than the mass market. Analysts point out that precisely Richemont’s iconic jewelry brands, led by Cartier and Van Cleef & Arpels, continue to possess pricing power. A few days ago, several market observers noted that while Richemont is striking cautious tones for Asia, it continues to benefit from high demand for high-priced watches and jewelry in Europe, the Middle East, and North America. Balance sheet quality also provides tailwind: the group has a net cash position in the double-digit billion range (in euros) and can thus invest in growth, conduct share buybacks, or gradually increase the dividend.
Another price driver – and simultaneously a factor of uncertainty – is Richemont’s digital arm. The planned restructuring of the online business around YOOX Net-a-Porter continues to occupy the markets. After previous sales plans could only be partially implemented, the market is waiting for clarity on how Richemont strategically integrates or scales down the lower-margin e-commerce area. Investors are particularly attentive to whether it succeeds in making digital activities more profitable and less capital-intensive without diluting the exclusivity of the brands.
The analysts’ vote for the Richemont stock is currently predominantly positive, albeit with a clear differentiation between short-term risks and long-term potential. In recent weeks, several major houses have updated their assessments. The picture: Predominantly Buy or Overweight recommendations, flanked by some neutral voices, but hardly any outright Sell recommendations.
For instance, UBS confirmed its “Buy” rating for Richemont and sees the fair value of the stock significantly above the current price level. The price target – depending on the study – is in the range of around 145 to 155 CHF and reflects the expectation that both margins in the jewelry segment and profitability in the watch segment will continue to improve. JPMorgan also appears constructive, citing primarily the high brand strength, the strong balance sheet, and robust demand in the high-end luxury segment. The US bank similarly estimates the price target in the mid-140s to 150s range in Swiss francs and maintains its “Overweight” rating.