Richemont sells Shanghai Tang

SWISS luxury goods group Richemont announced yesterday that it had completed the sale of its wholly owned subsidiary Shanghai Tang for an undisclosed amount.

The group said it had sold the stake to an entity controlled by Italian fashion entrepreneur Alessandro Bastagli and private equity fund Cassia Investments.

Richemont said Shanghai Tang was the first contemporary luxury brand from China. “Its modern and sophisticated range of men’s and women’s clothing, accessories and home decorations combine the style and heritage of the Orient with Western design influences,” the group said.

Richemont bought a controlling stake in Shanghai Tang in 1998 and acquired 100 percent ownership in 2008.

Shanghai Tang was founded in Hong Kong in 1994 by businessman Sir David Tang.

Richemont assured shareholders that the transaction would not affect its balance sheet. “The transaction will have no material impact on Richemont’s balance sheet, cash flow or results for the year ending March 31, 2018.”

The sale marks the first luxury brand to be sold by Geneva-based Richemont since 2007, and it follows a pledge by company chairman Johann Rupert in November to fix or sell underperforming businesses.

The announcement failed to inspire the market in early trade on the JSE, with Richemont shares rising 0.42 percent to R108.83 in the afternoon. The share closed 1.08 percent up at R109.34.

Luxury brands Richemont owns a portfolio of leading international brands, including Cartier, Montblanc and IWC Schaffhausen, that are managed independently.

Analysts said the disposal of Shanghai Tang made sense because the company had been struggling to deliver the goods in a highly competitive market.

Jason Forssman, a fund manager at Ashburton Investments, said Richemont had recently reorganised its reporting lines and management structures.

Forssman said although the company’s soft-luxury portfolio consisted of excellent brands, it had not been able to produce material returns in a highly competitive space that was subject to a multitude of challenges and perpetual disruption.

“The sale of Shanghai Tang, in conjunction with the closing of a number of Dunhill stores, could mark intent on the part of management to focus on their core activities, being watches and jewellery in the hard luxury space where they have a meaningful presence and core competence,” Forssman said.

Richemont has a primary listing on the Swiss Exchange and a secondary listing on the JSE.

In its financial year to the end of March, Richemont reported sales of €10.65 billion (R159.32bn) and operating profit of €1.76bn. Net profit for the year was €1.21bn.

Vestact analyst Sasha Naryshkine said Shanghai Tang did not have the centuries-old history of the other brands in the Richemont stable.

Naryshkine said it was regarded as a non-core asset that Richemont did not want to hold on to.

“Shanghai Tang sells clothing and leather goods, but Richemont wants to focus on jewellery and high-end products (with fatter margins),” he said.