Richemont's Jewellery Maisons Continue to Shine
Wide-moat Richemont is the number-two 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 for the watch business, 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 technological disruption. Additionally, control over distribution and high entry barriers in the jewelry 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.
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