Richemont / luxury: big brands strengthen their grip on big spenders

Swiss luxury group Richemont flaunts sparkling numbers. In the generalized backlash of the luxury sector, it is More than double Sales for 3 months until June. Growing demand for expensive labels also helped the Burberry report sales amount It is back to the pre-pandemic level. However, Richemont’s leading position in jewelry should allow it to continue to make significant profits.

The sustainability of the recovery of luxury now seems assured. There were concerns that the short-term impetus resulting from consumers’ inability to divert their cash savings to the experiment would reverse when the economy recovers.

Yet the resilience of mega-brands such as Cartier and Van Cleef & Arpels goes unreported. Both benefit from a long-term shift towards branded jewelry, especially worn by Asian customers. Innovations such as Clash, an avant-garde, modern and relatively affordable line launched by Cartier in 2019, have proven popular with young buyers.

It is possible to increase the market share. Branded jewelry currently occupies a little over a quarter of the market, much less than in other luxury sectors. Citi says it could reach 40 percent by 2030. Richemont has no shortage of competition. Other fashion groups want to go further in high-end branded jewelry. This was demonstrated by the enthusiasm of rival Kering. To attachWas categorically rejected by Richemont chairman Johann Rupert.

Therefore, there are not a lot of speculative premiums in stock prices. That hasn’t stopped Richemont from outperforming the luxury sector, up 37% this year. However, with a price / earnings ratio of 27 in 2022, it is trading at a 10% discount on this sector.

The discount should end on time, but it won’t go away. Hard luxury like jewelry is more cyclical than fashion and leather goods. Purchases of high value items are likely to be postponed due to the recession. However, the growth of branded jewelry is a long term trend. Richemont is very conducive to take advantage of it.

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