Sparkling results saw Richemont’s share price take off after the luxury goods group reported 24% sales growth in its Jewellery Maisons and 22% in its Specialist Watchmakers. It’s hard not to admire the robust attitude of its customer base, who appear to have responded to the cost of living crisis with a resounding “Stuff it” and a trip to the local Cartier boutique to ship in a few watches and a morale-boosting bauble or two.
Johann Rupert sounds his customary note of caution, flagging “volatile times ahead” with the challenges of inflation and severe cost of living pressures, though these are unlikely to put too much of a dent in Richemont’s core wealthy customer base. The impact will be greater on younger, more marginal buyers who have provided much of the sector’s growth of late, but who are likely to be cutting back on fripperies when they are struggling to pay the heating bill.
The group took a €2.7bn hit from a noncash writedown of its Yoox Net-a-Porter assets, as it sold its controlling interest in the online retailer to reposition it as a neutral, industry-wide platform. Sticking this into “discontinued operations” allowed the market to focus on the performance of its continuing operations, where margins are now second only to Hermes among its luxury peer group. Richemont’s balance sheet is looking particularly strong, and Rupert points out that it will continue to take a long-term view with a clear strategy to enable its brands to ride out uncertain times and build value without getting overly concerned about any bumps in the road in the short term.
SoftBank: Hard landing for Son
Masayoshi Son has often described himself as a vision capitalist, and in the glory years when SoftBank’s Vision Fund raised $100bn to establish itself as the world’s largest technology-focused investment fund, he was hailed by many as a latter-day messiah.
SoftBank was everywhere, and the money was flying out of the door at an astonishing rate as SoftBank seemed to be piling into every business plan with half a pulse. Relying on gut feel rather than more traditional forms of due diligence, Son was basking in the reputation that came largely from his inspired decision to stick $20m into the fledgling Alibaba Group in 2000.
While there have been some notable individual calamities, such as the vast sums SoftBank sank into WeWork at valuation levels that with hindsight look absolutely demented, it wasn’t until global markets turned sour on tech in general that the really big losses have been notched up. When cryptocurrency exchange FTX fell apart last week, it was no great surprise to see Softbank’s name on the investor list, and Softbank will take a full writedown on its $100m investment.
Losing $100m may look careless, but it’s a rounding error compared with the $9.8bn that the Vision Funds lost in the July to September quarter. Softbank itself returned to profit by selling down some of its stake in Alibaba, and Son has announced that he will be stepping back from running operations at the bank, focusing his efforts instead on getting chip maker Arm ready for a planned IPO. Given the company’s recent performance, investors will be distinctly happy to see him go.
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