Richemont signals Tiffany bid unlikely
Richemont signalled it’s inclined to look after its own business rather than start a bidding war with rival LVMH for jeweller Tiffany & Co. And the latest numbers show the Swiss watch and luxury company has some work to do.
The Cartier owner’s shares fell as much as 5.8% yesterday after it reported weaker-than-expected earnings and a slowdown in second-quarter revenue, hit by Hong Kong protests and investments in e-commerce.
That contrasts with accelerating sales growth at LVMH and Hermes. Richemont risks being overshadowed by LVMH in jewelry if the owner of Bulgari succeeds with its attempt to buy Tiffany.
Richemont isn’t actively defining acquisition targets, chief financial officer Burkhart Grund said on a call with reporters. In September, Richemont bought Buccellati for €230 million ($254 million), adding the Italian brand to its jewellery labels, which include Van Cleef & Arpels.
“When you have three of the best names in the jewellery industry, we prefer to focus on our strengths,” Mr Grund said.
The CFO declined to comment on whether Richemont would ever sell stock to fund an acquisition, except to say the company has never done so in the past. Most analysts say the company, with a €1.8 billion cash position, would stretch to raise funds if it were to counterbid for Tiffany.
The company, whose stable of 20 brands was built through a series of purchases, doesn’t exclude further acquisitions, Mr Grund also said.
“Obviously we are open to M&A and that has always been the case,” he said.
“Cartier is seeing increased competition from players like Bulgari,” wrote Luca Solca, an analyst at Sanford C Bernstein. “A stronger Tiffany could add to the pressure.”
Sales fell more than 10% in Hong Kong, where as much as a tenth of the world’s luxury goods are bought because they are usually a bit cheaper there than in mainland China. The Swiss luxury-goods maker said its first-half operating margin shrank for a second year as investments in e-commerce sapped profitability.