Share price: R103.52 JSE code: CFR
consider SELL IT selling SEEMS a company COUNTERINTUITIVE that is doing TO so well. But over the past 12 months the share price has really gone sideways to nowhere.
This is a poor performance considering that the weakening rand has been somewhat of a tailwind over the past few months and that Richemont reported organic sales growth of 10% in April.
Granted, this sales growth was higher than expected for the most part, but it comes with the backdrop of the luxury sector being down 7% in the week before the number was reported. Since April the stock has traded higher, but by mid-October it was back at the lows of April.
It seems the market finds little reason to buy Richemont. Further, concerns that MSCI may announce that it is reducing the weightings that companies with unequal voting structures hold in its indices at the end of October has some of the major market names under pressure.
One such company is Richemont. We don’t know if MSCI will make a major change to how it calculates its indices, but Richemont is a big contributor to a variety of indices in SA and globally. A reduction in its weighting in major indices will create forced selling from index tracking funds and ETFs, with potentially severely negative consequences.