Richemont's Jewellery Maisons Continue To Outperform

Wide-moat Richemont is the number-three global luxury goods conglomerate by revenue. Over the years, the group has amassed and developed a portfolio of very successful global brands, mostly in the hard luxury segment. Despite more pronounced cyclicality, hard luxury goods benefit from much longer product cycles and lower fashion risk. Most of the group’s brands are at least a century old, have iconic collections lasting 40-80 years, and have historically commanded significant pricing power. Prices of more than $5,000 for most of Richemont’s watch brands and the prestige value attached to them protect the group’s watch business from the emerging technological disruption. Additionally, control over distribution and higher entry barriers in the jewellery business, along with diversification by brand, give us confidence that the company will be able to generate economic profits well into the future, despite cyclicality.