Richemont Group In-Depth Guide: Jewellery Business Drives Growth, Watch Division Faces Challenges

Overview

This report is an introductory guide to Richemont Group published by Morgan Stanley, aimed at helping investors understand the group's development history, brand culture, and future direction. The report details the group's acquisition history since its founding in 1988, the financial performance and brand composition of its three business divisions (Jewellery, Specialist Watchmakers, Other Businesses), and analyzes management changes and strategic adjustments.

Core views

The Jewellery division is the group's core growth engine, accounting for 74% of FY26 sales with an operating margin of approximately 30.5%. Cartier and Van Cleef & Arpels are the main drivers, with Cartier expected to account for approximately 50% of group sales and approximately 77% of operating profit. The Specialist Watchmakers division faces challenges, with its FY26 sales share dropping to 14% and an operating margin of only 3.4%. Except for Vacheron Constantin, most brands have lost market share. The Other Businesses division includes Montblanc, Peter Millar, etc., and is overall loss-making, although Peter Millar performs well. In 2024, Nicolas Bos took over as Group CEO, marking a shift in management towards a jewellery-centric culture, strengthening brand desirability and long-term building. The YNAP online business was sold to Mytheresa in April 2025, with Richemont retaining a 33% equity stake, eliminating the valuation drag.

Analysis framework

The report adopts a segment analysis approach, dividing the group's business into three major sectors: Jewellery, Watches, and Others, examining their sales contribution, margins, and growth trends respectively. It traces the evolution of the brand portfolio through a historical acquisition timeline and analyzes strategic direction adjustments in conjunction with management changes. Financial analysis focuses on long-term trends from FY06 to FY26, including organic sales growth, operating margin fluctuations, and cash flow status.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  DCF Discounted Cash Flow

  The report mentions using DCF-based valuation methods, assuming a WACC of 8.4% and a long-term growth rate of 2.5%, to reflect the company's margin potential and cash flow.

• Corporate Fundamentals and Financial Framework

  Segment Business Analysis

  Sales and profits are broken down by the three major business divisions to analyze each segment's contribution to the group, identifying core growth drivers and drags.

• Competition and Strategy FrameworkMoat / competitive advantage

  Moat/Competitive Advantage

  Analyzes the high recognition and margins brought by iconic product lines of Cartier and VC&A (such as Love, Alhambra), constituting a brand moat.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Richemont (CFR.S)

  Entity, benefits from jewellery growth, harmed by watch weakness

  Strengths

  Owns two top-tier jewellery brands, Cartier and Van Cleef & Arpels

  Weaknesses

  Market share loss in Specialist Watchmakers division, losses in Other Businesses

  Comparison

  Jewellery performance outperforms some brands under LVMH, watch performance is weaker than Rolex

  Risks

  Slowdown in the Chinese market, continued deterioration in the watch division

• Cartier

  Core asset, contributes major profits

  Strengths

  High recognition of iconic product lines (Love, Trinity), margins exceed 30%

  Weaknesses

  Declining share of watch sales

  Comparison

  Sales are approximately twice that of Tiffany

  Risks

  Reliance on iconic product lines, fluctuations in the Chinese market

• Van Cleef & Arpels

  High-growth jewellery brand

  Strengths

  Alhambra collection contributes approximately 60% of profits, operating margin of 31.2%

  Weaknesses

  High dependence on a single product line

  Comparison

  Growth faster than industry average

  Risks

  Risk of single product line dependency

• Vacheron Constantin

  The only brand in the watch division gaining market share

  Strengths

  Success of the Overseas collection, high-end positioning

  Weaknesses

  Smaller scale than competitors such as Rolex

  Comparison

  Best performer within the watch division

  Risks

  Intensifying competition in the high-end watch market

• Peter Millar

  Best-performing brand in Other Businesses

  Strengths

  Leader in golf apparel, operating margin of 10.8%

  Weaknesses

  Primary market is the US

  Comparison

  Outperforms Montblanc and Chloé

  Risks

  Fluctuations in the US consumer market

Key data

• FY26 Group SalesEUR 22.42 billionYear-on-year growth of 4.8%
• Jewellery Division FY26 Sales Share74%52% in FY06
• Cartier FY26 Estimated Operating Profit Share77%Pre-divisional profit share
• Specialist Watchmakers Division FY26 Operating Margin3.4%>20% in FY06
• FY26 Net Cash PositionEUR 8.5 billionRecord high

Impact & implications

The strong performance of the jewellery business supports the group's overall valuation, but the weakness in the watch division and losses in other businesses limit profit release. Management changes and the divestment of the online business help focus on core strengths and improve operational efficiency. Investors need to pay attention to fluctuations in the Chinese market and the recovery of the watch division.

Risks

• Significant slowdown in the Chinese market
• Continued deterioration in the watch division
• Exchange rate fluctuations (appreciation of the Swiss Franc)

What to watch

• Efficiency improvements in the jewellery division
• Changes in market share in the watch division
• Recovery situation in the Chinese market