Cartier owner Richemont signals it is unlikely to go ahead in bidding war for Tiffany

JSE-LISTED Richemont signalled it’s inclined to focus on expanding its own jewellery brands rather than start a bidding war with rival LVMH for Tiffany & Co. And the latest numbers show the Swiss watch and luxury company has some work to do.

The stock fell as much as 5.8 percent after the Cartier owner reported weaker-than-expected earnings and a slowdown in second-quarter revenue, hit by Hong Kong protests and investments in e-commerce.

Richemont isn’t actively defining acquisition targets, chief financial officer Burkhart Grund said on Friday.

Richemont risks being overshadowed by LVMH in jewellery if the French rival succeeds with its attempt to buy Tiffany. The Louis Vuitton owner, which offered $14.5 billion (R215.6bn) for Tiffany, owns 75 labels, ranging from wine and spirits to fashion and perfume. Its market value has almost quadrupled over the past eight years to more than $220bn, towering over the $43bn value of Richemont. Investors consider LVMH could rejuvenate Tiffany the way it did with Bulgari, a brand it bought in 2011.

“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.”

Richemont’s market value is little changed from where it was five years ago, as growth has been held back by its bigger exposure to the boom-andbust cycle of the Swiss watch market.

About half of Richemont’s 20 brands are linked to timepieces. Its acquisition targets have been much more modest this year. In September, Richemont bought Buccellati for €230 million (R3.76bn), adding the Italian brand to its jewellery labels, which include Van Cleef & Arpels. the Grund said, declining further comment. He said Richemont is “obviously” however open to M&A, as it always has been.

Richemont’s sales fell more than 10 percent 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 Vacheron Constantin owner said its first-half operating margin shrank for a second year as investments in e-commerce sapped profitability.

Hong Kong contributed 8 percent of total sales, down from 11 percent, Grund said. In the longer term, the city may lose its ranking as the biggest export destination for timepieces as the price differential with the mainland diminishes and demand increases in the US and Japan. Richemont won’t abandon Hong Kong, where it has been trying to renegotiate leases to cut costs, Grund said. I Bloomberg

VISITORS in the Cartier stand at the “Salon International de la Haute Horlogerie” watch fair, organised by the Richemont group, in Geneva last year. I DENIS BALIHOUSE Reuters “When you have three of the best names in the jewellery industry, we prefer to focus on our strengths,” Grund said. He declined to comment on Tiffany directly. Most analysts say the company, with a €1.8bn cash position, would stretch to raise funds if it were to counter bid for Tiffany. Richemont has never sold stock to fund an acquisition,