Richemont holds on to its 'soft' luxury brands

Following the report of their first-half year results, Compagnie

Financière Richemont held a conference call during which Gary Saage, the company’s chief financial officer, revealed plans for future investments in the ‘soft’ luxury brands, focusing on the brands stores and concession stands. Previously a number of rumors had been circulating concerning Richemont's search for potential buyers for a number of their ‘soft’ luxury brands, such as Chloé, Dunhill and ShanghaiTang. Last month the company even appointed investment bank Nomura to aid in the impeding sale of leather good brand Lancel, while Citigroup analyst Thomas Chauvet published a report detailing his expectations for Richemont to make a ‘complete exit’ from its soft luxury divisions and focus on their hard luxury brands. Chauvet reported that the company’s soft luxury brands, Lancel, Chloé, Dunhill, Shanghai Tang, Purdey, Azzedine Alaia and Peter Millar could bring in upwards of 1.86 billion euros in a combined sale, while Net-a-Porter could bring in an estimated 2.28 billion euros.

However, Richemont has revealed that they have no longer plans to sell any brands and will instead invest back into their soft luxury brands portfolio, which includes all formerly mentioned brands. WWD reports that this decision not to sell any soft brands was first discovered in an internal memo sent to the company’s directors last week. In the memo, Johann Rupert, executive chairman and main shareholder of Richemont, shared his continuing plan for the company that looks beyond the yearly profits of the brands. Rupert, who is currently taking a year off from work, wrote: “As the controlling shareholder, it is my pleasure to confirm to you that I have no intention of disposing of any maison. We also have no intention of taking any of our maisons public through an IPO. For over a quarter of a century, our shareholders have benefited from superior returns on their investments. This was achieved by careful planning and nurturing of the brand equity of our maisons.”

Group chairman at Richemont, Yves-André Istel added, “No disposals are under consideration at this time or for the foreseeable future. Richemont’s maisons will continue to pursue their differentiated strategies and planned long-term investment programs.” He concluded that future investments shall be made in to help the brands recover, “as in the past, to assure their long-term prosperity.” During the conference call, Saage was unable to disclose how much the company would be investing into its soft luxury labels, but added that it could be a 'significant' amount. He added that Richemont stands strong behind all its labels, even the under performing ones and is looking to invest in new management and better resources for their struggling brands.

British multinational bank, HSBC, reported that Richemont’s announcement of no sale may be viewed in a ‘negative’ light and has told investors “not to expect too much, at least over the short term.” Richemont also reported that the company is cautious with its future expectations, with general capital spending and expenses for the current fiscal year and next year an estimated 800 million euros.