Fashion changes. The growth of the luxury goods industry over the years can be summed up in two words: "China" and "handbags." Now, it’s “America” and “Bling.” Cartier owner Richemont is emulating the lucrative new look, with a blowout sales boosting the stock 15% on Thursday.
The United States is gaining luster as a luxury market. This isn't an entirely new phenomenon: sales of high-end status symbols in the region have been a relative highlight of 2024 for many companies. Richemont's year-end quarter sales showed a surprising acceleration. The group's global sales rose 10%, beating consensus estimates, driven by U.S. growth that doubled to 22%.
In part, this reflects the increase in window space. Old World luxury brands have been pursuing their own version of the American dream, opening stores far from their traditional heartlands. On top of that, luxury brands have been enjoying their own gilded Trump onslaught. Plenty of stock market investors and budding crypto bros are clearly busy holiday shopping.
This looks like it may be here to stay. Expected Trump-era policies — including maintaining favorable tax treatment of incentives for private equity managers and eliminating President Joe Biden’s tax on stock buybacks — will put more money into the hands of already high spenders .
What you sell is just as important as where you sell it. Leather goods have outperformed jewelry for much of the past decade, growing from 34% of industry revenue in 2008 to 46% in 2022, according to UBS estimates. Handbags have somewhat replaced diamonds as the luxury consumer’s best friend.
The time seems ripe for rethinking. Prices for some desirable leather goods have risen far more than jewelry. A Chanel large flap bag cost about the same as a Cartier Love bracelet in 2018, but now it's about 60% more expensive. This improves the relative value proposition of jewelry and the growth prospects of the category.
Luxury goods investors hope Richemont's results herald a recovery for the industry. Europe's Stoxx luxury goods index rose 6.7% on Thursday.
To some extent, this may be true. Mood does seem to improve. Elite retailers across all industries are talking more about increasing their selling square footage in the United States.
But Richemont has better access to Americans and luxury goods than most companies. More than 70% of revenue last quarter came from jewelry. UBS estimates that a third of its sales will come from U.S. consumers at home and abroad in the year to March 2025, compared with just over a fifth for the industry as a whole. Cartier’s masters may be the brightest jewels in the luxury crown.
Camila.palladino@ft.com