Richemont’s Jewelry Pivot: A Blueprint for Luxury Resilience in a Volatile World

The luxury goods sector is in a state of flux, with geopolitical tensions, shifting consumer preferences, and macroeconomic headwinds testing even the strongest brands. Amid this turbulence, Richemont—the Swiss luxury conglomerate behind Cartier, Van Cleef & Arpels, and Piaget—has emerged as a master of adaptation. By aggressively pivoting toward its jewelry division, the company is building a fortress of resilience, geographic diversification, and margin sustainability. For investors seeking a luxury play with structural growth and defensive qualities, Richemont (RFN.S) is a buy with a 12-18 month horizon.

The Jewelry Engine: Outperforming and Outlasting

While the watch industry faces headwinds—particularly in Asia—Richemont’s Jewellery Maisons are roaring ahead. In fiscal 2025 (ended March 31), the segment delivered 8% sales growth at constant exchange rates, with Q4 growth exceeding double digits, driven by Cartier’s dominance and the integration of Vhernier. Contrast this with the Specialist Watchmakers division, which slumped 13%, as weak demand in China and Hong Kong (key watch markets) dragged margins to a paltry 5.3%.

The margin discipline in jewelry is equally compelling. At 31.9% operating margins, the division outperforms watches by over 26 percentage points, reflecting pricing power, cost control, and a focus on high-margin items like engagement rings and statement pieces. This is no accident: Richemont is systematically shifting capital and attention toward its jewelry brands, which now account for 73% of total sales.

Geographic Rebalancing: Beyond Asia’s Volatility

Richemont’s geographic strategy is a masterclass in risk management. While Asia-Pacific sales fell 13% (due to China’s sluggishness), Europe, the Americas, and Japan surged, with Japan’s sales jumping 25%—the highest in the portfolio. This diversification reduces overexposure to China, where luxury consumption remains erratic amid wealth redistribution and inflation fears.

The Americas, up 16%, and Europe, up 10%, now form a stable core, while Middle Eastern markets (up 15%) add further diversification. This shift ensures that even if Asia stumbles, other regions can carry the load—a critical advantage in today’s fragmented luxury landscape.

Margin Sustainability: Jewelry’s Structural Edge

Margins are the lifeblood of luxury, and jewelry’s profitability is non-negotiable. Unlike watches, which face fixed costs tied to Swiss manufacturing and currency headwinds, jewelry’s margins are shielded by:
1. Flexible Supply Chains: Manufacturing hubs in Europe and Asia allow cost control.
2. Premium Pricing Power: Cartier’s iconic designs command 20%-30% price increases annually, offsetting gold and labor costs.
3. Lower Inventory Risk: Jewelry’s bespoke nature reduces overstocking, unlike watches’ reliance on pre-produced collections.

The Watchmakers division’s 5.3% margin, meanwhile, highlights the sector’s structural fragility. With Swiss franc appreciation and underutilized factories, watches are a drag—but one the company is willing to tolerate as it bets on jewelry’s ascendance.

Cash Machine on Steroids

Richemont’s €8.3 billion net cash position (up €807 million year-on-year) is a war chest for the future. The recent sale of YNAP to Mytheresa for €555 million—while painful in the short term—freed up capital and reduced exposure to volatile online retail. The 9% dividend hike (to CHF 3.00/share) further signals confidence in this cash-rich model.

This liquidity fuels organic growth (e.g., expanding Cartier’s retail footprint) and strategic acquisitions like Vhernier, which adds modern, Italian flair to the portfolio. With €1.04 billion in capex in 2025, Richemont is doubling down on its winning formula: jewelry, retail, and direct-to-consumer dominance.

Why Buy Now?

• Valuation: At 17x FY2025E earnings, Richemont trades at a discount to peers like LVMH (22x) and Kering (20x), despite superior margin stability.
• Catalysts: The new CEO, Nicolas Bos, brings Van Cleef’s growth playbook to the group. The YNAP exit removes a drag, and the LuxExperience stake could yield future upside.
• Macro Hedge: Jewelry’s emotional appeal and wealth concentration in the West/Europe positions Richemont to outperform in both growth and downturn scenarios.

Risks to Consider

• Gold Prices: Rising gold costs could pressure margins if passed to consumers.
• Asia Recovery: A rebound in Chinese demand could revive watch sales—but Richemont’s diversified model minimizes reliance on that.
• Currency Volatility: The Swiss franc’s strength remains a watch-sector overhang.

Conclusion: A Luxury Play for the Decade

Richemont’s pivot to jewelry isn’t just a tactical move—it’s a structural realignment to dominate the $300 billion+ global jewelry market, which is growing faster than watches. With margin resilience, geographic diversity, and a cash engine firing on all cylinders, this is a luxury stock built for turbulence.

For investors seeking a defensive, high-margin, and cash-rich luxury play, Richemont is a no-brainer. Buy the dip, set a 12-18 month horizon, and let the jewelry juggernaut deliver.