Analysts at Bernstein are sticking with Richemont as their favorite luxury stock, even as they trim their profit forecasts for the Swiss group behind Cartier and Van Cleef & Arpels. The bank maintained its 240-franc price target and its “top pick” status, while cutting earnings-per-share estimates for fiscal 2027 and 2028 by 3% to 4%.
The move comes as investors worry about how a slowdown in Chinese luxury spending will hit the sector. Bernstein’s report on the Chinese consumer outlook suggests Richemont is better positioned than many rivals to weather the storm.
Why Richemont stands out
Bernstein argues that Richemont’s heavy reliance on jewelry—a category that tends to hold up better in downturns—gives it an edge. High-end shoppers continue to buy iconic pieces, while more cautious consumers still gravitate toward timeless items that hold value. That mix, the bank says, supports its decision to leave sales forecasts unchanged.
The cut to earnings estimates is more about profitability than demand. Bernstein expects Richemont’s operating margin to come in slightly lower than previously assumed, likely due to higher costs or a shift in product mix. The bank did not provide new margin figures, but the adjustment reflects a more cautious view on how much profit the company can squeeze from each sale.
Richemont’s portfolio includes some of the most recognizable names in luxury, from Cartier’s watches and jewelry to Van Cleef & Arpels’ high-end pieces. That brand strength, Bernstein believes, helps the company maintain pricing power even when consumer confidence dips.
China’s luxury slowdown
China has been a key growth engine for luxury brands for years, but recent data points to a cooling. Economic uncertainty, a property market slump, and shifting consumer behavior have all weighed on spending. China's property pledge lifts Vanke, but markets stay cautious, reflecting broader concerns about the country’s economy.
Luxury groups with heavy exposure to mainland China have felt the pinch. Richemont, however, generates a smaller share of sales from mainland China than some peers, and its jewelry segment is less dependent on discretionary impulse purchases. That relative insulation is a key reason Bernstein remains confident.
The bank’s decision to keep the 240-franc target suggests it sees limited downside risk. For context, that target implies a modest upside from current levels, though the stock has already rallied this year on hopes of a recovery.
What it means for investors
For everyday investors, this report is a signal that not all luxury stocks are created equal. When a major bank trims earnings forecasts but keeps a buy rating, it often means the long-term story is intact, but near-term growth may be slower.
Bernstein’s stance also highlights the importance of product mix. Companies that sell essential or aspirational items with strong brand loyalty—like jewelry—tend to be more resilient during downturns than those relying on fashion-forward or discretionary purchases.
Investors should watch how Richemont’s margins evolve in the coming quarters. If the company can maintain profitability despite China’s weakness, it could justify Bernstein’s confidence. Conversely, if the slowdown deepens, further estimate cuts may follow.
For those looking at the broader luxury sector, the key question is whether China’s slowdown is a temporary blip or a longer-term shift. Why US inflation stays high after five years of above-target prices is a reminder that global economic forces can affect consumer spending in unexpected ways.
Richemont’s resilience, if it holds, could make it a safer haven within the luxury space. But as with any stock, there are no guarantees. Bernstein’s target is just one analyst’s view, and markets can move in either direction.
For now, the message is clear: Richemont may be better placed than most to ride out China’s luxury slowdown, but investors should keep an eye on margins and China’s recovery pace.
