Luxury brands conglomerate Richemont has finally neatened up what was a badly frayed mess at its online business by swapping loss-making Yoox Net-a-Porter into Mytheresa, in exchange for a third stake in the enlarged business.
Will Richemont now grasp the nettle with regard to the underperforming operations it lumps under the unimaginatively named “Other” segment? These include numerous fashion and accessory brands.
The group has not enjoyed much success in the “soft luxury” sector — even if there are a few sweet spots among the sprawl of handbags and fancy pumps, most notably swanky sportswear retailer Peter Millar and fashion business Alaïa. In the six months to end-September the “Other” segment again underwhelmed with a 4% increase in sales, but posted another hefty operating loss of €52m.
By contrast, Richemont’s core jewellery maisons — which boast brands including Cartier, Van Cleef & Arpels and Buccellati — continued to shine brightly, managing to bash out operating profit of €2.3bn at an enviable margin of 32.9%. Shareholders will welcome the recent acquisition of Italian jewellery maison Vhernier, which will hopefully add further lustre to the margin of this segment.
Acquisition opportunities in the jewellery space are, unfortunately, few and far between ...
Richemont has €6.1bn cash on hand. But would further bulking up of the loss-making fashion and accessory segment be the right strategy? There has, over the years, been speculation Richemont would offload its poorer-performing pieces. Such talk is bound to resurface more audibly if the “Other” continues to drift away from sustained profitability.
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