Richemont, I dare say, might be the best little luxury brands company in the world today. It’s difficult to believe that just four years ago activist investors tried to shake up the Richemont board, much to chair Johann Rupert’s indignation.
Readers might remember that activist investor Bluebell Capital Partners was dead keen to appoint Francesco Trapani, a former CEO of Bulgari and former LVMH executive, to the Richemont board. As the FM noted at the time: “The emergence of a possible Trojan horse has clearly rattled the well-fortified solitude and collegial bliss that the luxury brands conglomerate … has enjoyed for decades.”
Bluebell’s tilt was premised on securing a better balance of board representation between Richemont’s low-voting A shares and high(er)-voting B shares. For those who need reminding, the Rupert family holds a relatively small economic interest in Richemont but retains 50% control of the voting rights via a 100% ownership of Richemont’s unlisted B shares.
Rupert was adamant that Trapani should not gain access to Richemont’s inner circle. Back then he told the FM: “In November we’ve got two weeks with all the Richemont companies that come present their strategies, budgets and which products they would like to launch from April 1 next year … there’s no way in which I am going to allow one of [LVMH CEO Bernard] Arnault’s trusted friends into these sessions.”
Bluebell never did manage to bust down Richemont’s boardroom door, but I sincerely hope it remained a shareholder. Of late, Richemont has pretty much blown away its peers. The first-quarter results for financial 2027 also impressed widely, even pushing the Richemont share price briefly above R4,000 on the JSE. The share has moved up 20% over three months.
The standout for me remains the high-margin jewellery division. This is an absolutely glittering business niche with renowned brands including Cartier, Van Cleef & Arpels, Buccellati and Vhernier. This segment hiked quarterly sales by a sprightly 24% (at constant exchange rates).
This is the seventh consecutive year that the jewellery segment has managed double-digit growth, which must be making Richemont’s competitors green with envy.
The market was impressed too, no more so than Vontobel Swiss Equity. Vontobel suggested Richemont was in a league of its own.
“Richemont’s 1Q27 print is flabbergasting, decisively beating the market’s 11% growth expectation,” its analysts said. “We believe this is the result of years of constant execution, disciplined price increases, efficient capital allocation and a portfolio of highly desirable brands with strong pricing power and geographical diversification.”
Vontobel also highlighted the acceleration of sales growth on an already elevated base amid a challenging macro backdrop and relative to peers (which are expected to post weaker results). Competitors might have read with some awe (and trepidation) that Richemont’s quarterly sales in the powerhouse jewellery segment were up not only across all four maisons, but also in all regions and all channels. Richemont’s ability to leverage these fine jewellery brands is clear, with the company noting that growth was “fuelled by constant innovation underpinning the desirability of iconic creations”.
This, of course, leads me to my constant querying of why Richemont even bothers to build out its “soft luxury” hub, bundled drably under “Other” business. The Other division, which includes fashion accessory icon Chloe and sportswear specialist Peter Millar, grew sales 9%. That’s not too shabby, but I’d bet the segment is still not close to sustained profitability.
I’m not mad about the soft luxury market generally. The pitch in recent years to a broader consumer market tarnishes (perhaps cheapens?) the aspirational character of pukka luxury brands, in my opinion. In any event, the stout margins achieved in the jewellery segment’s outstanding sales growth will feed strongly into the bottom line and into cash flows for the interim period to end-September.
Richemont’s cash at the end of the quarter topped €9bn — which is over R170bn and more than the group’s market capitalisation in 2010. I do see that the cash pile was bolstered by the sale of the stake in listed Swiss travel retailer Avolta — a stake that carried a value of €284m in the last annual report.
While Richemont’s ongoing success will reflect well on the Rupert family’s reputation as dependable custodians of long-term capital, I wonder if it will mute market criticism of its other international vehicle, Reinet. Reinet holds its much-anticipated AGM in mid-August and will, for the first time, offer shareholders a chance to engage remotely.
Reinet, as detailed several times in this magazine in recent weeks, sits on a formidable cash pile that represents around 85% of the entire portfolio value. This follows fairly recent sales of its investments in British American Tobacco (BAT) and unlisted UK financial services business Pension Insurance Corporation. While there has been a clamouring for a special dividend from shareholders, Reinet (which has been a mediocre long-term performer) has preferred to retain the cash pile while committing a smallish portion to share buybacks.
This week Reinet confirmed its latest NAV at €6.7bn, or around R126bn. This means the shares trading on the JSE are offering a discount of more than 30% on what is mostly a cash portfolio. This is obviously great for a share buyback exercise — though the market is not exactly enthusiastic, if Reinet’s still-depressed share price is anything to go by.
Meanwhile, it’s difficult not to notice that BAT’s share price has regularly pressed through the R1,000 mark on the JSE. Reinet sold its BAT shares in late 2024 and early 2025 when the share price was below £30 on the London Stock Exchange. I know this may be seen as a churlish comment, but if Reinet had retained its BAT shares, that stake today would have been worth £2.2bn (R48bn), and would have been a considerable uplift to the current NAV.