Luxury

Richemont, the market does not believe in a takeover by Lvmh

Bernard Arnault's investment in the Swiss group's shareholding is of a personal nature. Stocks cool on the stock market

by Monica D'Ascenzo

26 June 2024

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FILE PHOTO: Bernard Arnault, Chairman and Chief Executive Officer of LVMH Moet Hennessy Louis Vuitton, speaks during the company's annual shareholders meeting in Paris, France, April 18, 2024. REUTERS/Sarah Meyssonnier/File Photo

3' min read

Key points

Richemont entry
The inferences about a take-over

3' min read

The news of French billionaire Bernard Arnault's entry into Richemont's shareholding did not warm the markets in the days following the news. Far from it. So much so that the shares of the Swiss luxury group today left 1.63% on the parterre, ending at 142 Swiss francs on the Zurich marketplace. Arnault's group, Lvmh, fared no better, dropping 1.26% to €726.50 per share in Paris.

The investment in Richemont

The chairman of Lvmh has acquired a small stake in Richemont's shareholder base, according to Bloomberg. The exact size of the stake and Arnault's intentions are not known and the person directly involved would not comment on the rumour.

In fact, Bloomberg itself points out that this was a small investment, which was part of a broader portfolio of investments owned by the Arnault family in listed companies. It was enough, however, for the Swiss group's share price to gain 2.8%. However, this trend has already receded today, although the balance of the last five trading days remains positive by 0.78%.

The inferences about a take over

The indiscretion was enough to start the speculation of a possible takeover move by the French group on its Swiss competitor. The group, which counts brands such as IWC, Piaget and Jaeger-LeCoulture in its portfolio, is controlled by chairman Johan Rupert through a combination of two share classes that give him 51% of the voting rights. Difficult, therefore, to conquer Richemont without his consent.

'Arnault,' comments Kepler Cheuvreux analyst Jon Coxnon, 'makes no secret of the fact that he considers Cartier and Richemont's Van Cleef & Arpels to be two world-class brands, and I am sure that Lvmh is interested and has the financial resources to strike a deal. However, Johann Rupert of Richemont has repeatedly stated that the company is not for sale and has no interest in any kind of shareholding link'.

Arnault said in January that Rupert was an 'exceptional leader' and that he did not want to 'upset his strategy'. On that occasion he added: 'I understand that he wants to remain independent. I find that very positive. If he wants support to keep his independence, we will be there'.

Richemont last month announced changes in management, promoting Nicolas Bos, the head of jewellery brand Van Cleef & Arpels, to the position of group CEO. Bos took up the post on 1 June and joined the senior executive committee, while outgoing CEO Jérôme Lambert remains chief operating officer and reports to Bos and continues to serve on the board.

Richemont's 2023-2024 financial year

The Swiss luxury goods group ended the twelve months with a 3% increase in revenue at current exchange rates (+8% at constant exchange rates) to EUR 20.6 billion, driven by the jewellery maison, while operating profit stood at EUR 4.8 billion, an improvement of 13% at constant exchange rates. Meanwhile, the group has gained over 30% on the stock exchange since the beginning of the year.

At current exchange rates, the jewellery houses - Buccellati, Cartier and Van Cleef & Arpels - recorded a solid operating margin of 33.1%, with combined sales exceeding the EUR 14 billion mark. The 6% increase in sales (+12% at constant exchange rates) was supported by price growth and underpinned by strong double-digit growth for Buccellati. To accompany the dynamic development of the three maisons, Richemont intensified its investments in production, distribution and communication.

The Specialist Watchmakers division achieved a resilient operating margin of 15.2% considering the strength of the Swiss franc, on sales that were 3% lower year-on-year (+2% at constant exchange rates) at EUR 3.8 billion. A. Lange & Söhne and Vacheron Constantin posted robust performances, the group said in a note. Overall, sales in the retail channel also performed well and, combined with online retail sales, accounted for 60 per cent of specialist watchmakers' sales.

The 'Other' business area recorded a loss of EUR 43 million, with our fashion and accessories fashion houses breaking even, driven by an increased focus on creativity and increased sales in most fashion houses, including double-digit growth at Alaïa.