Johann Rupert kisses R45 billion goodbye

Richemont’s poor share price performance over the past few months has seen billionaire Johann Rupert lose an estimated R45 billion.

Richemont is a Swiss-based luxury goods conglomerate that owns iconic brands like Cartier, Montblanc, and Van Cleef & Arpels.

Rupert, one of South Africa’s most prolific businessmen, spun off the international assets from his father’s company, Rembrandt, to create Richemont in the 1980s.

He has served on the company’s board for years, and today, he is its chairman and managing partner.

It is important to note that Richemont is not the Ruperts’ only source of wealth. The family still has a significant stake in major companies like Remgro and Reinet Investments. However, Richemont is by far the largest company among the three. 

Due to the company’s history and how it was formed, the Rupert family is one of Richemont’s largest shareholders. In addition, Rupert controls 51% of the company’s voting rights despite owning only 10.2% of the capital.

Therefore, Rupert’s wealth is inextricably tied to the company’s performance, which has been mixed in 2024.

Richemont’s performance has been marked by both promising sales growth in the earlier months of this year and significant challenges that emerged in the latter half, contributing to a notable decline in its share price since June.

In the first half of 2024, Richemont saw robust demand for high-end luxury goods across markets like Europe and the United States. 

The luxury sector remained resilient as affluent consumers continued to spend despite inflationary pressures. For example, key brands like Cartier and Van Cleef & Arpels reported impressive sales figures, benefiting from increased consumer interest in fine jewellery and watches. 

Richemont’s digital and direct-to-consumer channels also showed positive growth, and overall, these factors contributed to a strong performance in the first two quarters.

However, as the year progressed, weakening consumer demand in the Chinese market impacted revenue expectations, as China had been one of Richemont’s most important growth areas. 

Lingering economic challenges, including slower-than-expected post-pandemic recovery and cautious spending by Chinese consumers, affected luxury brands across the board, and Richemont was no exception.

In addition, Richemont’s exposure to currency fluctuations has presented headwinds. The Swiss franc has remained relatively strong, reducing profit margins when international revenue is repatriated to Switzerland. 

Furthermore, rising interest rates and concerns about a potential global economic slowdown spurred investor caution toward luxury stocks.

To add to this pressure, the rise of competition from affordable luxury brands and the increasing popularity of digital resale platforms have pressured Richemont to reassess its pricing and distribution strategies. 

Therefore, over the past six months, Richemont’s share price has declined dramatically, down more than 23% since its 2024 peak in June. In the year to date, Richemont’s share price has declined by around 3.5%.

However, the company’s share price is still up over 10% for the past year, showing that investors still back the company’s ability to overcome and adapt to its challenges.

In July this year, it was even revealed that the richest man in the world, LVMH CEO Bernard Arnault, bought a small stake in Richemont.

In addition, the company recently announced plans to sell its struggling eCommerce platform, Yoox-Net-A-Porter, to German luxury platform Mytheresa – a move market analysts seem to support.

Therefore, some green shoots are appearing for the luxury retailer, which could point to a share price turnaround.

However, for now, Richemont and the Ruperts are taking the pain of the company’s poor share price performance over the past six months.

Daily Investor analysed how Rupert’s wealth has changed between 7 June 2024 and 8 November 2024. This analysis revealed that Rupert lost an estimated R45 billion.