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Fashions change. For many years, growth in the luxury industry could be summed up in two words as “China” and “handbags”. Now, it’s ‘America’ and ‘bling’. Cartier-owner Richemont, whose blowout sales drove the stock up 15 per cent on Thursday, is modelling this lucrative new look.
The US is gaining lustre as a luxury market. This is not an entirely new phenomenon: for many of the companies, sales of high-end status symbols in the region have been a relatively bright spot in 2024. Richemont’s year-end quarterly sales suggest a startling acceleration. Fuelled by a doubling of its US growth rate to 22 per cent, the group recorded a 10 per cent increase in global sales, smashing consensus expectations.
In part, this reflects increased window space. Old World luxury maisons have been pursuing their own American dream, opening stores away from traditional heartlands. On top of that, luxury has been enjoying its own, gold-plated, Trump bump. Flush stock market investors and newly-minted crypto bros have clearly been busy with their festive shopping.
This looks likely to continue. Expected Trump-era policies — including maintaining favourable tax treatment for awards paid to private equity managers, and removing President Joe Biden’s tax on stock buybacks — will leave more money in the hands of already high spenders.
What’s being sold matters as much as where. Leather goods outperformed jewellery for most of the past decade, growing from 34 per cent of the sector’s revenue in 2008 to 46 per cent in 2022 on UBS estimates. Handbags somehow replaced diamonds as the luxury customer’s best friend.
That looks ripe for a rethink. Price inflation in some desirable leather goods has far outpaced that in jewellery. A Chanel jumbo flapbag — which in 2018 cost about as much as a Cartier Love bangle — is now about 60 per cent more expensive. That improves jewels’ — relative — value proposition and the category’s growth prospects.
Luxury investors will be hoping that Richemont’s performance bodes well for the sector’s resurgence. The European Stoxx luxury index rose 6.7 per cent on Thursday.
To some extent, this may be true. There does seem to have been some general improvement in sentiment. And elite retailers across the board are talking more about adding US floorspace.
But Richemont is more exposed than most to Americans and bling. More than 70 per cent of its revenues last quarter came from jewellery. And a third of its sales will come from US consumers at home and abroad in the year ending March 2025, on UBS estimates, compared with just over a fifth for the industry as a whole. The owner of Cartier may be the shiniest gem in the luxury diadem.
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