Compagnie Financière Richemont SA
Headquarters: Bellevue, Switzerland
Founded: 1988 through the spin-off of the international assets owned by the Rembrandt Group Limited of South Africa
At the turn of the 20th century, three Cartier brothers set about turning their family’s Parisian jewelry house into a global brand. Inheriting the company founded by their grandfather Louis-Francois in 1847, Louis, Pierre and Jacques Cartier each focused on developing the company’s three branches in Paris, New York, and London, respectively. The House of Cartier had embellished the heads and necks of royalty for some time, having sold its first tiara to Princess Mathilde Bonaparte in 1856. The brothers’ expansion marked the beginning of a boom in Cartier’s sales of fine jewelry to the royals and the rich in a tradition that continues to this day. King Edward VII, after commissioning the creation of 27 tiaras for his coronation in 1902, referred to Cartier as “the jeweller of kings and the king of jewellers”. Today, the brand retains its association with the British Crown and Cartier has a royal warrant as jeweler to HM The King.
“The brand retains its association with the British Crown and Cartier has a royal warrant as jeweler to HM The King.”
The history of the House, in the century-and-a-half since its founding, is studded with fascinating stories. The early twentieth century obsession with pearls took Jacques Cartier*, the youngest of the three brothers, to Bahrain, “the land of pearls”. There, he fostered relationships with local pearl merchants and took their pearls back to Europe to festoon necklaces, tiaras, and bracelets for the company’s clients. One hundred of those pearls would form the 27 million dollar two-stranded necklace for which American financier Morton Plant would exchange his Fifth Avenue townhouse. That townhouse became Cartier’s New York home, which it has never left.
In 2022, Francesca Cartier Brickell, the granddaughter of Jacques, retraced her grandfather’s steps to Bahrain, re-enacting the same pose with the grandsons of the four Bahraini pearl merchants pictured in 1912. (Link to Instagram).
Cartier is now owned by Compagnie Financière Richemont, the luxury goods conglomerate, shares in which we hold in the Mayar Responsible Global Equity Fund. The company founder, Johann Rupert, inherited his father’s wide business interests, ranging from tobacco to mining to luxury goods. After a few reshuffles, Richemont was spun out to contain the family’s luxury goods and tobacco businesses, the latter of which were divested in 2008. While Cartier is undoubtedly the jewel in Richemont’s crown, the company owns many other hard luxury houses, including Van Cleef & Arpels, Jaeger-LeCoultre, IWC and Vacheron Constantin.
“The advantage conferred to old brands with illustrious histories, by way of incredible brand equity, is hard to capture on a balance sheet, and even harder for new entrants to disrupt.”
We have written previously of our preference for old businesses that have proven themselves over a wide span of time, and this is particularly true of luxury goods. The advantage conferred to old brands with illustrious histories, by way of incredible brand equity, is hard to capture on a balance sheet, and even harder for new entrants to disrupt. You can’t buy history. This advantage is reflected in the group’s profitability, with gross margins reliably above 60 percent and average returns on capital over the decade, pre-Coronavirus, of over 20 percent. Johann Rupert also runs the company with a strong balance sheet – often with net cash. Although some of Richemont’s businesses are more gravel than gem, in the form of a few smaller unprofitable brands the company shows no sign of disposing of, together with its largely unsuccessful foray into direct online distribution with the acquisition of Yoox Net-a-Porter in 2018, now thankfully divested to Farfetch – we expect the company’s core brands to continue to deliver over time. The global rise of the middle classes in Asia should, thanks to the powerful psychological signalling effects of buying luxury goods, provide Richemont with structural tailwinds in the years to come. As Coco Chanel put it, “luxury is a necessity that begins where necessity ends.”
