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

Swiss luxury group Richemont shows off some sparkling numbers.In the widespread backlash of the luxury sector, it’s More than double Sales for 3 months until June.The growing demand for expensive labels also helped Burberry report amount of sales It is back to the pre-pandemic level. However, Richemont’s leading position in jewelery should help it continue to make large profits.

The sustainability of luxury recovery now seems to be guaranteed. There was concern that the short-term boost from consumers’ inability to divert cash savings to experience could be reversed when the economy resumes.

Still, the resilience of mega-brands such as Cartier and Van Cleef & Arpels is not flagged. Both benefit from a long-term shift to branded jewelery, especially driven by Asian customers. Innovations such as Clash, an edgy, modern and relatively affordable line launched by Cartier in 2019, have proven to be popular with young buyers.

There is room to increase market share. Branded jewelery currently occupies just over a quarter of the market, far less than in other luxury sectors. Citi says it could rise to 40 percent by 2030. Richemont is not lacking in competition. Other fashion groups want to move further to high-end brand jewelery. This was demonstrated by the enthusiasm of rival Kering. Tie-upWas categorically rejected by Richemont’s chairman Johann Rupert.

Therefore, there are not many speculative premiums in stock prices. This did not stop Richemont from outperforming in the luxury sector, rising 37% this year. Still, with a price-earnings ratio of 27 in 2022, it is trading at a 10% discount on this sector.

The discount should end in time, but it won’t go away. Hard luxury like jewelery 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 jewelery is a long-term trend. Richemont is very suitable for benefiting.

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