Richemont too rich

Richemont released a trading statement yesterday, revealing that sales increased 8% for the third quarter and 18% for the nine months ended 31 December 2022.

The results were well received by the market, but analysts warned that the share is expensive after an incredible run over the last three months.

The Switzerland-based luxury goods company, partly owned by Johann Rupert, operates in three business segments – jewellery, watches, and fashion.

Well-known brands under its umbrella include Cartier, watchmakers Vacheron Constantine and Jeager-LeCoultre, and fashion brands Montblanc and Dunhill.

Richemont showed the resilience of luxury brands amidst challenging economic conditions in recent years.

Richemont’s share price experienced significant growth during this time. A R100 investment at the beginning of 2020 would have grown to R234 today – a 33% annualised growth rate.

Richemont has a market cap of R1.47 trillion, making it one of the largest companies on the JSE.

Richemont’s third quarter results showed a strong performance in its continued operations, especially given the uncertain global economic conditions.

It reported a 5% increase in revenue with constant exchange rates translating into an 8% increase with actual exchange rates.

Richemont experienced a decrease in its absolute revenue from Q3 in 2021 to Q3 in 2022 due to the discontinued operations of YNAP, which is currently held for sale and had a 6% drop in sales in Q3.

It experienced growth in its jewellery (+11%) and its fashion and accessories (+10%) segments but had a contraction in its watch segment (-3%).

Geographically there was a mixed bag. Japan grew by 43%, Asia Pacific contracted by 9%, and Europe grew by 19%.

Revenue in the Middle East and Africa grew by 10%, boosted by the Qatar World Cup, with the Americas seeing moderate growth of 3%.

Richemont hitting all-time high

Richemont’s share price had an impressive start to the 2023 year with 12.81% growth, hitting an all-time high.

The strong run over the last three months makes many analysts hesitant to put money into the share at these levels.

Speaking to Business Day TV, Wayne McCurrie from FNB Wealth & Investments said he would not be buying now.

“Richemont has had an almighty recovery, so I would wait a bit before investing,” McCurrie said. “It is a great company, as we all know, but at these levels, Richemont is not cheap.”

David Shapiro from Sasfin Securities said Richemont has never been cheap, adding that it looks good for the luxury market when Chinese consumers join the party.

“If China starts spending and we see the benefits, which was not in these results, it could make a difference to Richemont,” Shapiro said.