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1. Company Snapshot

1.a. Company Description

Compagnie Financière Richemont SA engages in the luxury goods business in Europe, the Middle East, Africa, Asia, and the Americas.The company operates through Jewellery Maisons, Specialist Watchmakers, and Online Distributors segments.It designs, manufactures, and distributes jewelry products; and precision timepieces, watches, and writing instruments, as well as clothing, and leather goods and accessories.


The company offers its products under the Cartier, Van Cleef & Arpels, Buccellati, A.Lange & Söhne, Baume & Mercier, IWC Schaffhausen, Jaeger LeCoultre, Panerai, Piaget, Roger Dubuis, Vacheron Constantin, Watchfinder & Co., YOOX, NET-A-PORTER, MR PORTER, The Outnet, Alaïa, Chloé, Montblanc, Peter Millar, Purdey, Serapian, TIMEVALLEE, dunhill, Delvaux, and AZ Factory brands through own boutiques and online stores.Compagnie Financière Richemont SA was incorporated in 1979 and is headquartered in Bellevue, Switzerland.

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1.b. Last Insights on CFR

Richemont's recent performance was driven by the company's US business being in a good position for growth, following the uncertainty surrounding the presidential election. The company's jewelry and fashion accessories business in the US and among American customers who travel has been growing consistently. Additionally, Richemont's luxury segment, which includes brands such as Cartier and Van Cleef & Arpels, has been resilient in a volatile environment. The company's focus on quality growth and its wide economic moat in the luxury sector have also contributed to its positive performance.

1.c. Company Highlights

2. Richemont's H1 Results: Strong Sales Growth and Robust Operating Margin

Richemont reported sales of EUR 10.6 billion, up 10% at constant exchange rates and 5% at actual exchange rates. The operating profit was EUR 2.4 billion, up 7% or 24% excluding foreign exchange movements. The operating margin improved by 30 basis points to 22.2%. The earnings per share (EPS) from continuing operations was not directly provided, but the actual EPS came out at 2.85, beating estimates of 2.72.

Publication Date: Nov -18

📋 Highlights
  • Sales Growth:: EUR 10.6 billion, +10% at constant exchange rates, +5% at actual rates.
  • Operating Profit:: EUR 2.4 billion, +24% at constant exchange rates excluding FX effects.
  • Jewellery Maisons:: 14% sales growth driven by Cartier, Van Cleef & Arpels, and Buccellati.
  • Gross Margin Pressure:: 190 bps decline, EUR 50 million U.S. tariff impact in H1, EUR 0.3 billion expected for 2024.
  • Free Cash Flow:: EUR 1 billion, +EUR 0.8 billion YoY, with EUR 6.5 billion net cash after EUR 1.9 billion dividend.

Segmental Performance

The Jewellery Maisons drove growth, with sales up 14% at constant exchange rates, led by Cartier, Van Cleef & Arpels, and Buccellati. The Specialist Watchmakers saw a 3% increase in sales in Q2, their first quarter of growth in almost two years. Sales in the Americas and Europe posted double-digit growth, while Asia Pacific returned to growth.

Gross Margin and Operating Expenses

The gross margin dropped by 190 basis points, primarily due to a 170 basis point FX impact, with gold price increases having a significant negative effect. Operating expenses were stable in value and increased by just 3% at constant exchange rates, driving positive flow-through from higher sales.

Cash Flow and Net Cash Position

Free cash flow was EUR 1 billion, up EUR 0.8 billion from the prior year period. The net cash position remained robust at EUR 6.5 billion after a EUR 1.9 billion dividend payment.

Outlook and Guidance

The company anticipates a greater unfavorable impact from increased U.S. tariff rates in the second half, estimating a full-year impact of around EUR 0.3 billion. Management noted a strong performance in the second quarter but did not provide guidance on future quarters, highlighting that they had a 10% growth in Q3 last year, making it a tough comparable.

Valuation Metrics

Analyzing Richemont's valuation metrics, the P/E Ratio stands at 43.58, indicating a relatively high valuation. The P/S Ratio is 4.95, and the EV/EBITDA is 21.53. The ROE is 13.1%, and the ROIC is 10.39%. Analysts estimate next year's revenue growth at -1.8%. These metrics suggest that the market has high expectations for Richemont's future performance.

3. NewsRoom

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Richemont struggles continue as first half operating profits fall 17%

Nov -11

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Cartier Owner Richemont’s Sales Fall as Luxury’s China Woes Linger

Nov -08

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Heard on the Street: Luxury Customers Get Less Bag for Their Buck

Nov -08

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Richemont remains cautious on raising jewellery prices despite high gold prices

Nov -08

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Cartier owner Richemont cautious on hiking jewellery prices despite high gold prices

Nov -08

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Richemont say US business in good position for growth

Nov -08

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Richemont First Half Sales Decline 1% in Rocky Times for Luxury

Nov -08

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Richemont First Half Sales Decline 1% in Rocky Times for Luxury

Nov -08

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.56%)

6. Segments

Jewellery Maisons

Expected Growth: 4.5%

The 4.5% growth of Jewellery Maisons from Compagnie Financière Richemont SA is driven by strong demand for luxury brands, particularly in Asia. The segment's growth is also attributed to successful product launches, strategic retail expansion, and a recovering global economy. Additionally, the company's focus on digital transformation and e-commerce has enhanced its brand visibility and appeal to younger consumers.

Specialist Watchmakers

Expected Growth: 5.5%

The 5.5% growth of Specialist Watchmakers from Compagnie Financière Richemont SA is driven by strong demand for luxury watches, particularly from the Asia-Pacific region, brand portfolio diversification, and successful product launches. The segment's resilience is also attributed to Richemont's strategic investments in e-commerce and retail expansion, enhancing brand visibility and accessibility.

Other

Expected Growth: 3.5%

Compagnie Financière Richemont SA's growth of 3.5% is driven by luxury market resilience, strong performance in jewelry and watches, and strategic investments in digital transformation. Diversification into new markets and product lines also contribute to this growth, leveraging the company's brand portfolio and operational efficiency.

7. Detailed Products

Cartier

Cartier is a luxury goods conglomerate that offers high-end jewelry, watches, and accessories. The brand is known for its elegant and sophisticated designs.

Van Cleef & Arpels

Van Cleef & Arpels is a luxury jewelry and watch brand that offers high-end timepieces and accessories. The brand is known for its unique designs and intricate craftsmanship.

Montblanc

Montblanc is a luxury goods brand that offers high-end writing instruments, watches, and accessories. The brand is known for its sophisticated designs and high-quality craftsmanship.

Ikéne

Ikéne is a digital platform that offers a range of services including digital assets management and blockchain-based solutions.

Richemont Watches

Richemont Watches is a watch manufacturing company that produces high-end timepieces under various brands including Cartier, Van Cleef & Arpels, and Montblanc.

8. Compagnie Financière Richemont SA's Porter Forces

Forces Ranking

Threat Of Substitutes

Compagnie Financière Richemont SA operates in the luxury goods industry, which has a moderate threat of substitutes. While there are alternative luxury brands, the company's strong brand portfolio, including Cartier, Montblanc, and Dunhill, reduces the threat of substitutes.

Bargaining Power Of Customers

The luxury goods industry is characterized by a relatively low bargaining power of customers. Compagnie Financière Richemont SA's customers are typically high-net-worth individuals who value exclusivity and are less likely to negotiate prices.

Bargaining Power Of Suppliers

The company's suppliers, such as diamond and gemstone suppliers, have some bargaining power due to the scarcity of these resources. However, Richemont's strong relationships with its suppliers and its significant purchasing power mitigate this threat.

Threat Of New Entrants

The luxury goods industry has high barriers to entry, including high marketing and advertising costs, strict quality control, and limited distribution channels. This reduces the threat of new entrants.

Intensity Of Rivalry

The luxury goods industry is highly competitive, with many established brands competing for market share. Compagnie Financière Richemont SA competes with other luxury conglomerates, such as LVMH and Kering, which increases the intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 44.37%
Debt Cost 4.33%
Equity Weight 55.63%
Equity Cost 10.40%
WACC 7.71%
Leverage 79.75%

11. Quality Control: Compagnie Financière Richemont SA passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Hermès

A-Score: 4.9/10

Value: 0.5

Growth: 8.3

Quality: 9.2

Yield: 0.6

Momentum: 4.0

Volatility: 6.7

1-Year Total Return ->

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Stock-Card
Richemont

A-Score: 4.7/10

Value: 1.3

Growth: 5.6

Quality: 6.9

Yield: 2.5

Momentum: 6.5

Volatility: 5.3

1-Year Total Return ->

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Stock-Card
Dior

A-Score: 4.6/10

Value: 5.9

Growth: 6.1

Quality: 5.8

Yield: 3.1

Momentum: 2.0

Volatility: 5.0

1-Year Total Return ->

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Stock-Card
LVMH

A-Score: 4.2/10

Value: 2.3

Growth: 6.2

Quality: 6.8

Yield: 3.1

Momentum: 2.0

Volatility: 4.7

1-Year Total Return ->

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Stock-Card
Ferrari

A-Score: 4.2/10

Value: 0.7

Growth: 7.7

Quality: 7.2

Yield: 1.2

Momentum: 3.5

Volatility: 4.7

1-Year Total Return ->

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Stock-Card
Kering

A-Score: 4.0/10

Value: 2.5

Growth: 4.3

Quality: 3.8

Yield: 3.8

Momentum: 7.5

Volatility: 2.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

173.45$

Current Price

173.45$

Potential

-0.00%

Expected Cash-Flows