60 Second Stocks: Richemont

A short-form breakdown taking a look at luxury goods company Richemont.

About the Business:

Richemont deals in the sale of luxury consumer goods 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 jewellery products precision timepieces, watches, and writing instruments, as well as clothing, and leather goods and accessories. Richemont is the second-largest luxury goods company in the world behind LVHM. LVHM owns luxury jewellery, fashion and alcohol brands including the likes of Louis Vuitton, Dior, Tag Heuer, Hublot, Moet, Hennessey, Veuve and Dom Perignon, to name a few.

Richemont was founded by South African businessman Johan Rupert in 1988. Richemont is current the 7th largest company on the JSE with a market capitalisation of R887 billion. Richemont is listed on both the Johannesburg Stock Exchange and the Swiss Market Index.

Richemont operates mainly through three core segments: jewellery, watchmakers and other business divisions. The jewellery division is made of the following brands:

- Cartier

- Van Cleef & Arpels

- Buccellati

The specialist watchmakers division consists of the following brands:

- A. Lange & Söhne

- Baume & Mercier

- IWC Schaffhausen

- Jaeger-LeCoultre, Officine Panerai

- Piaget

- Roger Dubuis

- Vacheron Constantin

The other business division includes the following brands that round up the luxury portfolio of the business:

- Azzedine Alaïa

- Chloé

- Dunhill

- Montblanc

- Peter Millar

- Purdey

The Financials:

Richemont has seen an impressive uptrend in revenue over the past few years despite a challenging macro-environment a global pandemic. This goes to show how resilient the luxury consumer market is. While the middle- and lower-class consumers have felt the squeeze fuelled by the pandemic and the rising interest and inflation rates, its been business and usually for Richemont.

Over the past 5 years revenue has grown from 11.1 billion euros in 2017 to 17.88 billion euros in 2021. Revenue has thus grown at a CAGR (compounded annual growth rate) of roughly 10%. Earnings growth has lagged revenue growth slightly as profit margins have come under pressure. During the same 5-year period earnings have grown from 1.43 billion in 2017 to 2.22 billion in 2021. This equates to an earnings CAGR of roughly 9%.

Richemont is incredibly efficient when it comes to cash generation which is a huge plus for shareholders. Free cash flow has grown from 1.9 billion in 2017 to 3.62 billion in 2021. Free cash flow has grown at roughly 13.5% per year which has exceeded revenue and earnings growth.

Stock Price 

Richemont is currently trading at R168.95 a share down 32% from its 52-week high of R250.44 and up 14.67% from its 52-week low of R147.73