The luxury conglomerate behind Cartier is beating LVMH at its own game

• Richemont, the conglomerate behind brands like Cartier, is outperforming its competition.
• Its focus on hard luxury, like jewelry and watches, has helped it through a rough economic climate.
• Plus, over-indexing in China and a clear direction for leadership have helped the company shine.

LVMH is the biggest luxury conglomerate in the world. As the owner of brands like Louis Vuitton, Moët & Chandon, and Bulgari, the French company has become synonymous with luxury — and made a lot of money doing it, as demonstrated by CEO Bernard Arnault's position as the third-richest man in the world.

But there's another corporation beating LVMH at its own game, and you probably haven't even heard of it: Richemont.

Switzerland-based Richemont, behind brands like Cartier, Van Cleef & Arpels, and Piaget, is having a moment.

Its stock has climbed more than 20% since the start of the year, outperforming LVMH as well as Kering, which sells brands like Gucci and Saint Laurent. It's a boon for investors seeking reassurance that European luxury stocks aren't over — especially in China.

"Richemont has provided reassurance to investors on several points. Cartier and Van Cleef are continuing to show very strong momentum and notable growth," Chiara Battistini, JPMorgan's head of European luxury and sporting goods research, told Business Insider over email.

One major benefit in this uncertain economic climate: Richemont is skewed to hard luxury, including the iconic designs of Cartier, which has been creating jewelry for high-flying members of society for more than 150 years, as well as Van Cleef.

"In tough times, because we are in tough times right now in luxury, there is a tendency to buy less, buy better," Erwan Rambourg, the global cohead of consumer and retail research at HSBC, told BI. "At the end of the day, if you have to buy one piece of jewelry from one jeweler, it's going to be Cartier."

In the first quarter of this year, Richemont's largest brands all saw positive year-over-year growth on Google Trends and an increase in website visits, according to a JPMorgan report from May. Meantime, brands like Louis Vuitton and Gucci saw declines in both areas.

Even LVMH's Arnault has noticed: "In the competition, there's a very good group, that is the Richemont Group," he said in January, going on to compliment the group's chairman, fellow billionaire Johann Rupert. "Rupert, we consider as an outstanding leader. And I don't, in the slightest, wish to upset his strategy."

All that glitters is gold

Unlike luxury conglomerates LVMH and Kering, Richemont focuses disproportionately on hard luxury — literally, the stuff made from hard materials like gold, gemstones, and diamonds. In the 2024 fiscal year, jewelry made up 69% of its revenue and watches 18%.

It's a good time to be in that business. During difficult macroeconomic times or when people are squeezed, they are more likely to splurge on something they know will hold value, like metals and gems, than on something less durable and more trend-driven, like clothing or handbags (with Hermès being a notable exception).

"At times of economic crisis — I mean, not that everyone runs out and buys a Cartier watch or a Van Cleef & Arpels necklace — but they are a safer bet," Fflur Roberts, the head of global luxury goods at Euromonitor, told BI.

Part of the reason is that a classic Cartier piece — like the rectangular Tank watch launched in 1919 or the three-banded Trinity ring, which debuted five years later — is unlikely to go out of style. The Love collection, a Cartier classic featuring a screw motif, has been around for five decades and still makes up more than 20% of the company's revenue, HSBC's Rambourg said.

"It doesn't have the fashion risk to the same extent as, for instance, apparel and even leather goods," Jelena Sokolova, a senior equity analyst for Morningstar, told BI of the fine jewelry business. "All of this favors the most established brands: Cartier and Van Cleef."

Jewelry is also a good investment. A 2022 study by Credit Suisse and Deloitte called fine jewelry and watches "safe havens" in "uncertain times," with steady single-digit returns and low volatility.

"The world might come to an end, and your piece of jewelry might still be worth something," Rambourg said.

And when it comes to buying bling as an investment, no one wants to roll the dice on something new.

"When people are concerned about putting their money in other, more traditional financial assets, then jewelry has become an area where people are investing," Euromonitor's Roberts said. "Spending a bit more and getting a really true heritage luxury brand like Cartier" is safer, she added.

China cha-ching

Last month, rumors swirled that Van Cleef planned to raise its prices in China — and chaos ensued. Local news outlets reported lines forming at the country's 30-plus stores as customers rushed to buy Alhambra bracelets, which cost anywhere from $1,420 for a single clover on a yellow gold chain to $61,500 for a five-clover diamond design.

The frenzy shows just how devoted Chinese consumers are to the now-iconic clover pieces, which can be seen on the wrists and necks of the country's influencers and street-style inspirations.

The popularity is reflected in the data. Driven by Richemont's top brands, Cartier and Van Cleef, sales gained 7% in the country, including Hong Kong and Macau, in Richemont's 2024 fiscal year.

Meanwhile, some luxury conglomerates, like Gucci's parent company Kering, have struggled in that market. While Richemont's results in the country have been touch-and-go depending on the quarter, the company is still beating out the competition.

"They are over-indexed in China compared to their peers," Sokolova said.

Part of that is related to the increasing popularity of jewelry in the country. In 2023, jewelry and watches overtook handbags as the top-spending category in China, according to a McKinsey report. By 2027, its share of discretionary spending is expected to gain another four percentage points.

On top of that, the philosophy of buying a tried and true brand — and specifically recognizable items from one of these brands — is even stronger in China. Branded jewelry is expected to increase from 15% of the market in 2019 to 25% to 30% in 2025, according to a 2021 McKinsey report. That growth is driven by customers in Asia.

From the aforementioned Alhambra line, which was called out on Richemont's earnings call, or Cartier's Love collection, no one does branded like Richemont.

"If you're in a bar or restaurant, you're sitting at a distance, you can recognize the Labra pendant from Van Cleef. You can recognize the Love ring or the Love bracelet or the Trinity," Rambourg said. "It's the equivalent of putting a big fat logo on a bag."

Passing down the crown jewels

There's another piece of hardware that Richemont has handled well: its scepter.

In May, the company announced a new CEO, Nicolas Bos, a Cartier veteran who transformed Van Cleef from an unprofitable brand to Richemont's second-biggest cash driver.

It was welcome news in an industry in which many companies remain family-run — a model accompanied by uncertainty. LVMH and Prada have both been caught up in media speculation around who will take over when their patriarch and matriarch, respectively, step aside.

While chairman Rupert is still staying on — the controlling shareholder, he founded the company by spinning the international brands off of his father's South African conglomerate in 1988 — Bos' appointment provides some relief for investors. The company's announcement caused shares to tick up 6%.

"The No. 1 question I've had for the past two years is who's going to replace Rupert? What's the post-Rupert world?" Rambourg said. "They just bought themselves a lot of time by nominating a 51-year-old to run the group."

The appointment also included a restructuring of the company, naming one CEO for the entire conglomerate, which "provided better clarity and more straightforward structure on corporate governance," JPMorgan's Battistini said.

That said, Bos does have his work cut out for him, particularly regarding the YNAP, the group's online fashion retailer that owns sites like Net-A-Porter. It's a lossmaker for a company, and a deal to offload it fell apart in December. Last week, it was reported that the platform would pull out of China amid dwindling sales.

But as they say, heavy is the head that wears that crown — but perhaps not the arm that wears the Cartier Love bracelet.