Richemont, the Swiss luxury goods group controlled by Johann Rupert, crossed the R1-trillion level in market valuation for the first time last week, joining five other stocks on the JSE that have achieved the milestone.
The share price surged 10% to a record R223.93 on Friday, its biggest rise in a year, after releasing better-than-expected interim results. The market gains were equivalent to about R100bn.
With a market value of R1.165-trillion, Richemont is now the fourth-biggest company on the JSE, behind British American Tobacco, Anheuser-Busch and Prosus.
The strong market gains on Friday also propelled the JSE all-share index to a record high within a whisker of the 70,000 level.
“The results were strong and well above expectations,” said Aslam Dalvi, portfolio manager at Kagiso Asset Management. “The company is benefiting from very strong demand for luxury products. Growth was strong across all categories and regions.
“Growth figures were distorted by a low base, but in general they delivered strong, double-digit sales growth year over year and relative to its pre-Covid-19 base.”
Group sales in the six months to end-September were 20% higher than pre-Covid-19 sales, signalling that the global luxury goods market was benefiting from pent-up demand as global economies open up with the ramp-up in vaccination programmes.
Richemont’s iconic brands include Cartier, Van Cleef & Arpels, Net-a-Porter, Mont Blanc and Piaget.
The Americas, Asia Pacific, and Middle East and Africa generated double-digit sales increases during the review period that more than offset the softness in Europe and Japan, which are seeing a gradual recovery.
Group operating profit surged 331% to €1.95bn from a year ago and 67% compared with 2019.
“Their margins were a blowout, the second-best on record — 37.9% on the jewellery division. I’ve never seen it that high,” said Nick Kunze, portfolio manager at Sanlam Private Wealth.
“The watch margins, which have always disappointed compared with the rest of the group, also came in at 20%, a big improvement and impressive earnings all round.”
Richemont also announced that it is in advanced talks with global e-commerce platform Farfetch in its attempts to salvage its unprofitable Yoox-Net-a-Porter (YNAP), which has been criticised as a drag in unlocking the value of the group.
The scope of discussions includes Farfetch investing directly in YNAP as a minority shareholder, with other investors to be invited to participate alongside.
“The ultimate objective is for [YNAP] to be a neutral platform, with no controlling shareholders,” the company said, adding that there cannot be certainty that the discussions will lead to definitive agreements, or about the timing or terms of any transaction.
Artisan Partners, one of the shareholders in Richemont, told The Wall Street Journal earlier this week that YNAP is a value trap.
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