Story Highlight
– Richemont’s jewellery segment drives growth and profits.
– America’s sales growth outpaces other regions significantly.
– Watch brands face varying performance and ownership challenges.
– Richemont emphasizes direct sales over wholesale channels.
– AI’s impact on luxury marketing remains uncertain.
Full Story
Richemont’s annual general meeting in Geneva on 9 September provided shareholders with insights into the company’s financial achievements and future direction. The discussions highlighted a stark contrast between the performance of the group’s jewellery divisions and its watch brand operations.
The presentations leading up to the AGM, particularly in May, revealed a firm financial footing for Richemont, courtesy of its four Jewellery Maisons: Cartier, Van Cleef & Arpels, Buccellati, and Vhernier. These brands achieved €16.5 billion in sales, marking a remarkable increase of 14% when adjusted for constant exchange rates, with operating profits nearing €5 billion and a robust operating margin of 30.5%.
Conversely, Richemont’s Specialist Watchmakers, which encompasses renowned names such as Vacheron Constantin and IWC, faced more challenging circumstances. They reported €3.1 billion in sales—an increase of only 1% in constant currencies and a decline of 4% when reported in euros. Their operating profit stood at just €107 million, resulting in an operating margin of 3.4%.
This disparity prompts important questions regarding the sustainability of manufacturing and distribution capabilities within the watch segment, especially amidst a phase of reduced demand. While some brands, like Lange and JLC, indicated signs of recovery in the latter half of the financial year, the overall margins remain unsatisfactory.
Geographically, growth across markets varied. The Americas demonstrated a notable 17% increase in sales at constant exchange rates for FY2026, with jewellery and watch brands both contributing to this surge. Europe followed with a 9% increase, while the Asia-Pacific region saw an 8% rise, maintaining Richemont’s largest market share at 32%.
Johann Rupert, Richemont’s chairman, attributed the robust performance in the US to strong domestic demand and an ongoing trend towards direct-brand retail. In Europe, however, spending appeared healthy, yet growth decelerated in the final quarter due to a decline in tourist expenditure. The situation in China remains intricate, with a modest 3% growth reported across China, Hong Kong, and Macau; however, Hong Kong did exhibit strong double-digit growth.
During a Q&A session, CEO Nicolas Bos pointed to the success of innovative product offerings, including those from Buccellati and newer collections from Cartier, as evidence of ongoing customer interest in creativity. He also noted that prior expectations for luxury demand in less urbanised Chinese areas had led to overexpansion in the brand’s boutique portfolio. In response, Richemont is now rationalising its store locations, focusing on more profitable areas, and management has tempered hopes for a swift return to previous growth rates in China.
Rupert’s straightforward remarks regarding the sale of Baume & Mercier underscored Richemont’s strategic repositioning. He conveyed that the brand required a different ownership model than what Richemont, with its fixed cost structure, could provide. The sale to Damiani was completed in July, yet Rupert firmly dismissed any implications that Richemont would look to divest other watch brands, particularly Jaeger-LeCoultre, describing its manufacturing capabilities as crucial for the wider group.
On the operational front, direct sales represent a significant portion of Richemont’s revenue, contributing 77% in FY2026—71% from physical retail and 6% from online sales. Both the direct sale and wholesale channels have experienced growth, although the latter remains a vital avenue for brands, offering localised reach without the overhead of managing additional boutiques.
The emergence of artificial intelligence was also discussed, as management acknowledged the shifting landscape in how younger consumers access information. However, no specific forecasts regarding AI’s impact on sales or marketing were provided.
Looking ahead to FY2027, Richemont begins with €8.5 billion in net cash and has reported impressive sales growth of 20% for the first quarter ending 30 June 2026. Although jewellery sales have surged by 24%, the watch division has only increased by 8%. The challenge remains for the watch sector to enhance profitability while jewellery continues its expansion.
In conclusion, while Richemont boasts the financial flexibility to navigate these tumultuous market conditions, the linkage between renewed interest in watch brands and tangible profitability will be crucial for the larger group’s overall success moving forward.
