Behind Richemont's price dropping

Richemont dragged the broader market lower, a sales miss and warning about an uncertain Chinese outlook weighed on the stock. Down just over six percent on the day. This fall and the general sentiment amongst the luxury goods stocks prompted a FT broader special report on luxury goods, I emailed the pdf to my kindle. Imagine using that line twenty years ago. Email? Pdf? Kindle? What is that? Email, OK, Plato and Unix mail systems existed, I remember using Plato in the school library. I wonder what that place looks like? The school library that is. I do know that all the Lance Armstrong books have been moved to the fiction section. I didn't make that line up. The truth is that Swiss watch exports to China have fallen at the end of last month. I do wonder if some of this had to do with the ruling (and only) party in China deciding to take a stance on corruption and cutting back wasteful expensive ceremonies, and if that knock on effect delayed certain purchases. As the FT piece said, when quoting a luxury goods analyst, the rich uncle is not going to stop buying an expensive Rolex at his nephew's wedding. No. The culture of gifting is not going away soon.


But. And this is a big but. The article also suggests that if the current head of the communist party, Xi Jinping (expect him to be president of China in the next two months) does not have a taste for the culture of gifting. And perhaps a fancy wristwatch might impact progress forward internally in the party, how am I to know? We are probably, according to the FT report in a period of normalisation. A period where European sales would continue to be strong, with the tourism trade, whilst North America would improve. And I noticed that the Japanese market was starting to pick up too. So, should we be anxious about owning Richemont? The short answer is no. The company was in excess of 3 billion Euros in cash, either to take advantage of a deal (not now) or as a buffer if times get tougher.