Richemont sells Shang­hai Tang

The Star Early Edition - - COMPANIES - Sandile Mchunu

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.

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