Is Bernard Arnault Planning to Acquire Rival Richemont?

HEIDI TRUONG

- Fashion Blogger -

Bernard Arnault, CEO of LVMH, seems to be accumulating shares in Richemont, the luxury conglomerate known for owning Cartier and other prestigious jewelry brands.

Rumors are swirling in the luxury industry as Bernard Arnault, CEO of LVMH, seems to be accumulating shares in Richemont, the luxury conglomerate known for owning Cartier and other prestigious jewelry brands. This speculation has prompted discussions about whether Arnault is considering a takeover of Richemont, despite frequent denials from Richemont’s founder, billionaire Johann Rupert. Two months ago, Richemont announced that Nicolas Bos would succeed Johann Rupert, 74, as the new CEO. This leadership transition raises questions about what makes Richemont such a valuable asset. Let's examine the numbers and strategic positioning of this luxury giant.

Richemont's Financial Performance

In the 2023/2024 fiscal year ending in March, Richemont reported revenue of €20.6 billion ($22.5 billion). This places Richemont as the second or third largest luxury fashion company in the world, alongside French conglomerate Kering, depending on annual revenue. Jewelry is the powerhouse of Richemont, accounting for 69% of its total revenue, largely thanks to Cartier, often dubbed "the jeweler of kings and the king of jewelers."

Richemont does not disclose individual brand sales, but Jean-Philippe Bertschy, an analyst at Swiss investment management firm Vontobel, estimates that Cartier's revenue was approximately €11 billion last year. Another high-performing brand under Richemont is Van Cleef & Arpels, which has experienced "extraordinary" growth in recent years.

514cfce5-6867-4848-a6c2-ffdb68afc374 — List of luxury brands under Richemont Group

Resilience in Economic Downturns

Richemont's focus on high-end jewelry offers significant resilience during economic downturns. Luxury jewelry targets ultra-wealthy customers who are less affected by economic fluctuations. This strategic focus provides Richemont with a robust defense against the broader economic challenges that can impact other sectors more severely.

Expanding Horizons: Watches and Luxury Fashion

In addition to its stronghold in jewelry, Richemont owns eight watch brands, contributing 18.2% to the company’s revenue. These include renowned names like Baume & Mercier, IWC Schaffhausen, and Piaget. According to estimates by Morgan Stanley and Swiss consultancy LuxeConsult, Richemont’s largest watch brand, Vacheron Constantin, achieved sales of CHF 1.09 billion in 2023, making it one of only eight Swiss watch brands with revenues exceeding CHF 1 billion.

Richemont’s expansion into watches includes Montblanc, initially known for its pens, which ventured into watchmaking in 1997. Montblanc is part of a group of about 10 accessory and fashion brands, including Chloe, Alaia, and Gianvito Rossi. Last year, Richemont held a majority stake in this division, which analysts consider the weakest within the group due to years of underperformance. However, this segment only accounts for 12.6% of Richemont’s annual revenue.

Control and Governance: Johann Rupert’s Grip

Johann Rupert founded Richemont in 1988 to consolidate assets from the South African conglomerate Rembrandt Group, including his father Anton Rupert's tobacco business. Through acquisitions, Richemont gradually divested from tobacco to focus on luxury goods. Although Rupert owns only 10% of the capital, he controls 51% of the voting rights through a dual share structure with A and B shares. This structure protects the group from hostile takeovers and thwarted an attempt to alter the board in 2022. This defensive stance further fuels speculation about Bernard Arnault's intentions. One of the world's richest individuals, Arnault's potential acquisition of Richemont would significantly impact the luxury sector.

Conclusion

The speculation surrounding Bernard Arnault’s potential acquisition of Richemont highlights the dynamic nature of the luxury industry. As LVMH continues to explore strategic opportunities, the potential takeover of Richemont could redefine the landscape of high-end fashion and jewelry. While challenges remain, the allure of combining two luxury powerhouses presents a compelling narrative for the future of the industry. As the story unfolds, the luxury sector will undoubtedly be watching closely, anticipating the next move in this high-stakes game of corporate strategy and market dominance. Whether or not a takeover materializes, the mere possibility underscores the intense competition and ambition that drives the world of luxury fashion.