Morningstar | Richemont Reports Strong Five-Month Sales, Appoints CEO; Shares Modestly Undervalued
We retain our wide moat rating and our fair value estimate of CHF 90 per share for Richemont after the company reported slightly stronger five-month sales than we expected (10% constant-currency growth versus 8% in our forecasts). We see shares as modestly undervalued.Jewellery Maisons grew at a faster-than-expected pace (14% versus our estimate of 10% and versus 11% constant-currency growth for peer Tiffany from February to July). However, the specialist watchmakers division lagged our forecasts with 4% growth (we expected 6%), as the group remained cautious about selling into the wholesale channels. The company noted that retail sales from specialist watchmakers were strong. Retail sales excluding online businesses grew by 14%, while wholesale increased by 2%. Other segments were broadly in line with our expectations, growing at 4% (affected by divestments of Lancel and Shanghai Tang). Online retail, Yoox Net-a-Porter and Watchfinder, was consolidated for the first time, adding 12% to sales.
Geographically, all regions except the Middle East contributed to growth, with Asia and the Americas leading gains, a trend we noticed across our luxury coverage.
Also, notably, Richemont ended its almost two-year experiment with a no-CEO governance structure by appointing Jerome Lambert to the position with immediate effect. Lambert currently serves as COO at Richemont and is a company long-timer, having joined the group in 1996. He previously held leadership positions in Jaeger LeCoultre (2002-13) and Montblanc (2013-17), contributing to the brand’s successful diversification into leather goods and watches, new product introductions (for example, Montblanc augmented paper), and improving performance.
Compagnie Financiere Richemont is engaged in the luxury goods market. Co.'s interests encompass some names such as Cartier, Van Cleef & Arpels, Piaget, Vacheron Constantin, Jaeger-LeCoultre, IWC, Alfred Dunhill, Montblanc and Net-a-Porter. Co.'s luxury goods businesses are separated into four segments: Jewellery Maisons (design, manufacture and distribution of jewellery products), Specialist Watchmakers (design, manufacture and distribution of precision timepieces), Montblanc Maison (design, manufacture and distribution of writing instruments) and Other Businesses (Alfred Dunhill, Lancel, ChloA(c), Net-a-Porter, Purdey, textile brands and other manufacturing entities).
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