Rhys NorthwoodWednesday, Jul 16, 2025 1:59 am ET

15min read

The luxury market is entering a new era of volatility, with geopolitical tensions, shifting consumer preferences, and macroeconomic headwinds testing even the most established players. Amid this turbulence, Richemont—a titan of high-end watches and jewelry—stands out as a paradox: its jewelry division thrives while its watch business stumbles. This divergence offers a compelling investment thesis, as the group's strategic pivot to jewelry positions it as a in a slowing luxury market.

Richemont's fiscal year 2024 results (ended March 2025) reveal a stark split between its jewelry and watch divisions. While jewelry Maisons like and grew sales by to €15.3 billion, fueled by double-digit gains in Europe and the Americas, the Specialist Watchmakers division (IWC, Panerai, etc.) sank , hit by a .

The contrast in profitability is even starker: jewelry's dwarfs watches' , reflecting disciplined pricing and cost control. This margin resilience is critical as inflation and tariffs bite—jewelry's higher margins act as a buffer, while watches face margin erosion from rising gold prices and tariffs.

Richemont's jewelry division has mastered geographic balancing. While Asia Pacific (excluding Japan) saw watch sales plummet , jewelry sales in the region grew at constant exchange rates, driven by . Even in China, jewelry sales in key cities rose , outperforming watches' .

The watch division, by contrast, remains overly reliant on Asia Pacific, which once accounted for of its sales. This concentration has become a vulnerability, as Chinese consumers shift spending toward jewelry—seen as a tangible store of value—and away from watches during economic uncertainty.

Richemont's response to tariffs and trade barriers is a masterclass in operational agility. Key strategies include:
1. : Rolex, Patek Philippe, and Audemars Piguet reduced output to avoid oversupply, preserving brand equity.
2. : The group bought excess watch inventory in China to manage overstock risks, while jewelry's (now ) gave it pricing control.
3. : Swiss factories furloughed staff temporarily to reduce fixed costs, a lifeline during the watch slump.

Meanwhile, jewelry's (vs. watches' reliance on wholesalers) insulated it from tariff-driven margin squeezes. This shift toward retail ownership also enabled Richemont to capture more value at the top of the pricing chain.

The . Jewelry's allure as a liquid, culturally symbolic asset—especially in regions like China and the Middle East—is hard to replicate. Cartier's (e.g., Love bracelets, Juste un Clou rings) have become heirloom investments, while watches face competition from cheaper alternatives and digital timekeeping.

Richemont's in 2024 further solidified its jewelry dominance, adding a Swiss high-jewelry brand to its portfolio. This contrasts sharply with peers like , whose watch divisions (e.g., TAG Heuer, Zenith) face similar Asia-driven headwinds, and whose stock trades at a higher multiple (23x P/E vs. Richemont's ) despite weaker margins.

Richemont's and jewelry-driven growth make it a compelling contrarian bet. Investors should consider:
- : The stock has underperformed peers due to watch woes, but its jewelry tailwinds and balance sheet offer a margin of safety.
- : Jewelry's 31.9% operating margin leaves room to expand further as volumes grow.
- : A recovery in tourism and domestic demand could stabilize watch sales, but jewelry's resilience ensures downside protection.

Richemont is uniquely positioned to outperform peers in a contracting luxury market. Its jewelry division's , geographic diversification, and fortress balance sheet make it a defensive must-own for investors seeking stability. Target a 12–18-month price target of CHF 190+, with a selective long position recommended. In a world of uncertainty, Cartier's glittering heirlooms just got brighter.