Richemont: Luxury with Lasting Value

Richemont is one of the world’s leading luxury goods groups, best known for its high-end jewelry, fine watches, and premium accessories. With iconic Maisons such as Cartier and Van Cleef and Arpels at its core, the company combines heritage craftsmanship with global brand power and disciplined execution. As Richemont sharpens its focus through selective acquisitions, exits non-core businesses, and continues to grow in emerging markets, it remains a central player in the evolving landscape of global luxury. The question is: Does this Swiss luxury group belong in your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in Richemont at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Richemont, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Compagnie Financière Richemont SA is a Swiss luxury goods holding company and the fifth largest luxury group in the world. Founded in 1988 and headquartered in Bellevue, Switzerland, Richemont operates through three main segments: Jewellery Maisons, Specialist Watchmakers, and Other. The group designs, manufactures, and distributes high-end jewelry, watches, writing instruments, leather goods, and fashion products. Its portfolio includes globally respected brands such as Cartier, Van Cleef & Arpels, Buccellati, Piaget, Vacheron Constantin, A. Lange & Söhne, Jaeger-LeCoultre, IWC, Panerai, Alaïa, Chloé, Montblanc, and Delvaux. Richemont sells its products through a mix of directly operated boutiques, online channels, and selective wholesale partnerships. Richemont’s competitive moat rests on a combination of brand heritage, artisanal excellence, pricing discipline, and controlled distribution. Flagship brands like Cartier and Van Cleef & Arpels have built timeless appeal over more than a century, commanding strong pricing power and brand loyalty across generations. These brands consistently rank among the most sought-after at auctions, reinforcing their value as long-term assets rather than mere fashion. The group invests heavily in preserving rare craftsmanship and developing new talent, operating watchmaking schools, design academies, and apprenticeship programs across Switzerland, Italy, and France. This ensures not only continuity of expertise but also a deep cultural identity embedded in each Maison. Rather than chasing short-term trends or rapid expansion, Richemont follows a philosophy of scarcity and deliberate curation. Its selective boutique strategy, cultural partnerships, and exhibition spaces help maintain a sense of prestige and narrative around its brands. The group avoids excessive price increases that could dilute brand trust, instead focusing on organic growth through exclusivity and innovation.

Management

Nicolas Bos serves as the CEO of Compagnie Financière Richemont a role he assumed in June 2024. A graduate of ESSEC Business School Nicolas Bos brings more than three decades of experience in the luxury goods industry having spent the entirety of his professional career within Richemont. His deep knowledge of the group’s brands operations and culture makes him uniquely positioned to lead the company through its next phase of evolution. Nicolas Bos joined Richemont in 1992 and began his journey in the creative and marketing side of the business. In 2000 he transitioned to Van Cleef and Arpels one of Richemont’s most prestigious Maisons where he held positions of increasing responsibility before being appointed Global President and CEO in 2013. Under his leadership Van Cleef and Arpels experienced a period of significant growth and creative renewal firmly reinforcing its status as a leader in high jewelry. Since 2019 Nicolas Bos has also overseen Buccellati further showcasing his versatility and ability to lead multiple heritage brands. Known for his creative sensibility long-term mindset and collaborative leadership style Nicolas Bos was initially reluctant to take the top job at Richemont. According to Richemont Chairman and founder Johann Rupert Nicolas Bos declined the role when first offered saying “I’m going to have to disappoint you because I’m having far too much fun with what I’m doing right now. And I don’t need the hassles and the politics and everything of a CEO role.” Johann Rupert saw this as a strength rather than a limitation responding “That’s exactly why we want you. We don’t want a unification power thing. We want somebody who doesn’t want the job.” After 18 months Nicolas Bos accepted the position. While Nicolas Bos is new in his current role his deep roots within the company and Richemont’s brand ecosystem provide him with a solid foundation. His transition is also supported by the ongoing involvement of Johann Rupert who remains Chairman. Johann Rupert’s conservative and long-term approach to brand stewardship such as his resistance to price increases continues to influence the group's strategic direction. Given Nicolas Bos’s track record of brand building creative leadership and intimate understanding of Richemont’s values and culture I believe he is well equipped to lead the group into its next chapter.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Richemont has historically delivered a relatively low return on invested capital. This might raise concerns at first glance, but much of it comes down to the way the company is run and the strategic choices it makes. First, Richemont owns a lot of its infrastructure. It manufactures its own products, runs its own workshops, and owns many of its boutiques. While this gives the group full control over quality and brand experience, it also means tying up a large amount of capital in buildings, machinery, inventory, and people. This increases the size of the capital base, making it harder to show high returns on paper. Second, not all of Richemont’s segments have contributed equally to profitability. Its two flagship jewelry brands, Cartier and Van Cleef & Arpels, are highly profitable and continue to perform strongly. In contrast, other divisions like the Specialist Watchmakers have historically delivered lower returns. Until recently, the group’s former digital business, Yoox Net-a-Porter, was a particular drag on performance due to its capital intensity and lack of profitability. Richemont has now exited this business, which should help improve the group’s overall financial profile going forward. Third, Richemont is very conservative financially. It carries little debt and holds a large cash position, which lowers reported returns because that excess cash is included in the invested capital calculation but doesn’t generate much profit. Finally, Richemont invests heavily in preserving traditional craftsmanship. From training watchmakers and jewelers to funding cultural foundations, the group takes a long-term approach that doesn’t always translate into short-term financial efficiency, but helps sustain brand desirability and pricing power over decades. So while Richemont’s ROIC may look low on the surface, it’s not necessarily a warning sign. Instead, it reflects a deliberate strategy focused on heritage, control, and long-term brand building. With the recent exit from its loss-making digital business and continued strength in high-margin jewelry, the group is now better positioned to improve its overall returns. In that context, Richemont’s lower ROIC is less a sign of weakness and more a reflection of its capital-intensive approach and long-term commitment to brand equity.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Richemont’s equity has steadily increased over the years, reaching a record high in fiscal year 2025. This growth is mainly the result of strong and consistent profits from its core business, particularly its high-margin jewelry brands like Cartier and Van Cleef & Arpels. While the company pays dividends, it retains a significant portion of its earnings each year, which adds to its equity base. Another reason equity has grown is that Richemont has taken a conservative approach to financial management. It holds very little debt and keeps large cash reserves, which strengthens the balance sheet and avoids losses that might otherwise reduce equity. Finally, from time to time the company has sold assets that have helped increase equity further, such as the sale of its loss-making digital business Yoox Net-a-Porter and some real estate. All of this reflects a cautious, long-term approach to managing capital, which has allowed Richemont to steadily grow its equity over time.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. It is not surprising that Richemont has delivered positive free cash flow every year over the past ten years. Over the past five years, the company has achieved stronger levered free cash flow margins compared to earlier periods, and there are several reasons for this improvement. The most important driver has been the strong growth and profitability of its jewelry business. Cartier and Van Cleef and Arpels in particular have become more dominant within the group, and their high margins have boosted operating cash flow. At the same time, Richemont has managed its investments carefully. While it continues to open boutiques and expand manufacturing capacity, it has done so in a disciplined way without overspending. As the group has grown, it has also benefited from scale and improved cost control, allowing it to generate more cash from its revenue. Free cash flow and the levered free cash flow margin declined in fiscal year 2025, but this was primarily due to increased investment in the business rather than a deterioration in performance. Richemont raised its capital expenditure to support long-term growth, focusing on upgrading and expanding its boutique network and significantly increasing manufacturing capacity for its Jewelry Maisons in France, Switzerland, and Italy. The company also made selective real estate investments and continued to invest in IT infrastructure. These investments are expected to benefit the company over the long term. Richemont uses its free cash flow to pay dividends and has a consistent track record of raising its dividend. Hence, shareholders can expect dividend growth as free cash flow expands. That said, the free cash flow yield is currently at its lowest level since 2017, suggesting that the shares are trading at a premium valuation. However, we will revisit valuation later in the analysis.

Debt

Another important aspect to consider is debt. It is essential to assess whether a company has a manageable level of debt that can reasonably be repaid within three years. To evaluate this, I divide total long-term debt by annual earnings. Based on Richemont’s financial statements, the company currently has debt equivalent to 1,19 years of earnings. This is well below the three-year threshold, indicating that Richemont’s debt level is manageable and not a concern when evaluating the company as a potential investment.

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Risks

Macroeconomics is a risk for Richemont. The luxury sector as a whole is highly sensitive to economic cycles, and Richemont is no exception. During periods of economic slowdown or uncertainty, consumers often cut back on discretionary spending, and luxury goods, being nonessential by nature, are among the first to be deprioritized. This makes Richemont particularly exposed to broader macroeconomic volatility. Management has acknowledged that ongoing macroeconomic and geopolitical uncertainty has already affected the group’s financial results and is likely to continue doing so. Rising input costs, especially for raw materials like gold, which Richemont is one of the largest nongovernment buyers of, can weigh heavily on margins. Gold prices are unpredictable, and because product development in the Jewelry Maisons occurs years in advance, the group must make pricing and positioning decisions without knowing future costs. As management candidly put it, we do not control that input cost. That directly hits the bottom line. Currency fluctuations are another key macro risk. Richemont generates the majority of its revenue outside Switzerland, yet much of its production and cost base, particularly for its watch Maisons, is located in Switzerland. A strengthening Swiss franc puts pressure on margins, as it raises the cost of Swiss-based operations while revenue earned in other currencies converts back into fewer francs. Recent results have already shown that unfavorable foreign exchange movements contributed to a decline in operating profit. The company also faces challenges with its universal pricing strategy, which aims to keep prices consistent across countries. This approach is meant to be fair to all customers and to prevent people from buying products in cheaper markets to resell them elsewhere. However, it becomes harder to uphold when currency values move in different directions. For example, the weak Japanese yen has made Richemont products much cheaper in Japan, attracting tourists who come specifically to shop. If the company raised prices in Japan to fix this imbalance, it could upset loyal local customers who would feel they are being treated unfairly. Management has acknowledged that this is a delicate balance, and it must be handled carefully to protect both brand consistency and customer relationships.

Competition is a risk for Richemont. The company operates in an intensely competitive global luxury market, where it faces both established giants and ambitious new challengers. Among the most formidable rivals is LVMH, a conglomerate with enormous scale, deep financial resources, and a broad portfolio of luxury brands. LVMH’s CEO Bernard Arnault has pointed out that Richemont owns two of the top eight global luxury brands - Cartier and Van Cleef - while LVMH owns four. The other two, Hermès and Chanel, are also dominant independent players. This highlights how concentrated brand power is at the top of the luxury industry and how challenging it is to maintain global relevance. Richemont’s brands must compete not only on design and heritage but also on visibility, store network, marketing execution, and digital engagement. LVMH’s scale allows it to outspend most peers on all of these fronts, reinforcing its brands’ reach and desirability. Richemont, while strong in jewelry and high watchmaking, must constantly invest to keep up with this pace and remain top-of-mind with consumers globally. In addition to large incumbents, Richemont faces growing pressure from emerging players. The rise of digitally native luxury brands and successful direct-to-consumer models has lowered some of the traditional barriers to entry. New brands are increasingly able to bypass wholesale channels, build audiences on social media, and tap into younger consumer tastes more quickly and flexibly. This is particularly important as luxury demand continues to shift toward younger demographics and emerging markets. One example is Laopu Gold, a Chinese jewelry brand that has gained popularity rapidly by blending local cultural identity with modern luxury aesthetics. Its recent IPO and strong consumer appeal underscore the potential of national champions in key markets. While Richemont views such brands as positive for the overall energy and desirability of the category, they also represent a competitive challenge, especially in regions where local pride, cultural resonance, and digital agility are increasingly important.

Counterfeiting is a risk for Richemont. Like all luxury companies, Richemont relies heavily on the exclusivity, craftsmanship, and authenticity of its products to justify premium pricing and maintain brand prestige. Counterfeit goods threaten these foundations by imitating Richemont’s designs, logos, and style, often at a fraction of the cost. While counterfeiting has existed for decades, it remains an ongoing and evolving challenge, especially as global demand for luxury increases and technology makes fakes harder to detect. Every counterfeit sale is a missed opportunity for Richemont to sell a genuine product. Even if some buyers eventually trade up to the real thing, as Chairman Johann Rupert has suggested, the presence of fakes in the market can undermine brand value in several ways. For one, widespread access to counterfeits reduces the perceived rarity and exclusivity of Richemont’s goods, making them feel less special. This can weaken consumer motivation to buy authentic products, particularly among first-time luxury buyers. More seriously, the sheer volume of counterfeit goods in circulation - part of a global black market estimated to exceed hundreds of billions of dollars - can create confusion and erode trust. When consumers are unsure whether a product is real, even when purchased through legitimate channels, they may hesitate to buy. This uncertainty can hurt brand reputation, damage long-standing customer relationships, and reduce pricing power. The rise of social media platforms like TikTok has made the situation worse. On these platforms, especially among younger users, counterfeit luxury goods are often promoted openly as affordable and stylish alternatives to authentic products. Influencers post videos showcasing fake purchases and even link to e-commerce sites where such items can be bought, further normalizing the idea that counterfeits are acceptable substitutes. This trend risks shifting consumer attitudes away from valuing authenticity and toward simply achieving the look of luxury at any cost. While Richemont enforces a strict zero tolerance policy and actively combats counterfeit production and distribution, the scale and speed of the digital world make enforcement increasingly difficult. In the long term, counterfeiting threatens not just revenue, but the core emotional connection that Richemont’s brands rely on: a sense of trust, quality, and timeless value that cannot be replicated.

Reasons to invest

Emerging markets are a compelling reason to invest in Richemont. While the company already generates a large share of its revenue from established regions like Europe and the Americas, growth in emerging markets is playing an increasingly important role in its long-term prospects. In the Middle East and Africa, Richemont recently saw strong growth, with sales rising by double digits. This was driven by increased spending from both local customers and international tourists, especially in markets like the United Arab Emirates. The region's rising affluence, expanding tourism sector, and investment in luxury retail infrastructure make it a growing source of demand for high-end goods. China remains one of Richemont’s most strategically important markets. Although recent macroeconomic uncertainty and the lingering effects of strict lockdowns have temporarily dampened consumer confidence, Richemont’s leadership is optimistic about the long-term outlook. Unlike many Western countries, Chinese consumers hold relatively low levels of debt and continue to have strong saving habits - what Chairman Johann Rupert refers to as the "six wallets" effect, meaning each consumer benefits from the financial support of parents and grandparents. When confidence returns, this will likely translate into a renewed wave of luxury spending. Richemont is also well positioned in China due to the continued appeal of heritage brands. While local brands are gaining ground in other industries like electric vehicles and technology, the luxury goods segment still favors companies with long histories and global recognition. Richemont’s Maisons, particularly Cartier and Van Cleef and Arpels, remain aspirational among Chinese consumers who value authenticity, craftsmanship, and timeless design. Moreover, China’s long-term economic strategy increasingly emphasizes domestic consumption over export-driven growth, which aligns well with Richemont’s positioning as a premium consumer brand.

The jewelry segment is a key reason to invest in Richemont. Jewelry is the group’s largest and most profitable division, and it plays a central role in Richemont’s long-term growth strategy. The company owns some of the world’s most prestigious jewelry Maisons, including Cartier and Van Cleef and Arpels, both of which have seen strong and consistent growth. These brands benefit from global recognition, deep heritage, and highly differentiated product lines that command pricing power and consumer loyalty. One of the most compelling reasons to focus on Richemont’s jewelry business is the broader market context. The global jewelry market remains highly fragmented, with a large share of sales still coming from unbranded or locally branded products. In many countries, such as India, jewelry buying is deeply rooted in cultural traditions and supported by skilled local craftsmanship. As consumers become more global, however, they increasingly shift toward internationally recognized brands that offer not just design and quality but also investment value and status. This long-term trend of consumers trading up from unbranded to branded jewelry presents a significant runway for Richemont to grow market share. Richemont is well-positioned to capture this shift. Cartier is one of the most valuable jewelry brands in the world, with iconic collections such as Love, Juste un Clou, and Trinity driving both volume and brand desirability. Similarly, Van Cleef and Arpels has built enduring demand through collections like Alhambra, which has grown in prominence over the past few decades and still has room to expand further. The Maison is also developing other lines like Perlée and Frivole into major contributors. Management is actively investing in these collections while carefully protecting their exclusivity. In addition to its established leaders, Richemont is also nurturing younger or more niche jewelry brands such as Buccellati and Vhernier. These Maisons offer entirely different aesthetics and cultural roots, broadening the group’s appeal across different customer tastes and price points. Buccellati, for example, has already reached profitability ahead of schedule and complements Cartier and Van Cleef by offering a distinct style rooted in Italian artistry. Finally, Richemont is gaining market share not just from unbranded players but also from other branded competitors. Management has confirmed that both Cartier and Van Cleef are outperforming peers in their categories.

Acquisitions and divestitures are a reason to invest in Richemont. The group has shown a careful and strategic approach to managing its portfolio, acquiring brands that complement its strengths while divesting businesses that no longer align with its long term priorities. This disciplined capital allocation allows Richemont to focus more on its core areas of expertise, especially high end jewelry and accessories, while stepping away from businesses that may dilute profitability or distract from its long term vision. A recent example is the acquisition of the Italian jewelry Maison Vhernier. Known for its modern and distinctive aesthetic, Vhernier brings a fresh design perspective to Richemont’s portfolio and complements established brands like Cartier and Van Cleef and Arpels. Richemont is now investing in the integration and development of Vhernier to unlock its full potential, following a similar approach to the one taken with Gianvito Rossi, the Italian luxury shoe brand it acquired earlier. These acquisitions show how Richemont is able to expand thoughtfully into adjacent categories while remaining consistent with its luxury heritage and values. At the same time, the company has been willing to exit businesses that no longer fit. A major example is Richemont’s sale of YOOX NET A PORTER, its former digital retail arm. After years of losses and limited strategic fit, Richemont transferred YNAP to Mytheresa in exchange for a minority stake in the newly combined company, now known as LuxExperience. This move removed a financial drag from Richemont’s books while still preserving some long term upside through its ownership interest in the digital platform. The sale of YNAP reflects Richemont’s willingness to adapt and optimize its portfolio even when it means reversing course on earlier investments. The exit also allows Richemont to sharpen its focus on areas where it has a real competitive edge, products that are rooted in craftsmanship, history, and strong brand equity. Jewelry and high end accessories are categories where Richemont not only leads but also enjoys pricing power and long term consumer demand. Redirecting resources from loss making ventures to these core segments improves both efficiency and strategic clarity.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 6,11, which is from 2023. I have selected a projected future EPS growth rate of 9%. Finbox expects EPS to grow by 8,9% in the next five years. Additionally, I have selected a projected future P/E ratio of 18, which is twice the growth rate. This decision is based on Richemont's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be CHF 64,36. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Richemont at a price of CHF 32,18 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 4.252, and capital expenditures were 995. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 697 in our calculations. The tax provision was 696. We have 590,4 outstanding shares. Hence, the calculation will be as follows: (4.252 – 697 + 696) / 590,4 x 10 = CHF 72,00 in Ten Cap price.

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With Richemont's Free Cash Flow Per Share at CHF 5,52 and a growth rate of 9%, if you want to recoup your investment in 8 years, the Payback Time price is CHF 66,36.

Conclusion

I believe that Richemont is an intriguing company with strong management. It has built a moat through brand heritage, artisanal excellence, pricing discipline, and controlled distribution. While the company has achieved a relatively low return on invested capital, this reflects its infrastructure and long-term investments in preserving traditional craftsmanship, so the low ROIC is not a warning sign. Richemont has increased its levered free cash flow margins over the past five years, and these margins are expected to remain at these improved levels. Macroeconomics is a risk because the luxury sector is highly sensitive to economic downturns, currency fluctuations, and rising input costs like gold. These factors can pressure margins, reduce discretionary spending, and complicate Richemont’s global pricing strategy. Competition is another risk, as Richemont operates in a crowded luxury market where both established players and digital-first newcomers are competing for consumer attention. This requires constant investment in brand building, product development, and digital engagement. Counterfeiting also poses a risk by weakening the sense of exclusivity and trust that supports premium pricing. The spread of high-quality fakes and their promotion on social media can undermine brand value, especially among younger consumers. On the positive side, emerging markets are a major reason to invest in Richemont. Rising wealth, tourism, and expanding retail infrastructure in regions like the Middle East and Asia are driving long-term demand for luxury goods. China remains particularly important, with strong savings, a cultural preference for heritage brands, and government policies that favor domestic consumption. Richemont’s jewelry segment is another compelling strength. It is the company’s most profitable division, anchored by iconic Maisons that enjoy strong pricing power and loyalty. As consumers shift from unbranded to branded jewelry, Richemont is well positioned to capture more market share. The company’s approach to acquisitions and divestitures also supports its long-term success. By acquiring complementary brands and exiting non-core businesses, Richemont has sharpened its focus on high-end jewelry and accessories, improving both profitability and strategic clarity. I believe Richemont is a great company, and buying shares at CHF 100, which offers a 30 percent discount to its intrinsic value based on the Ten Cap method, would represent an attractive long-term investment.

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