Our opinion on the current state of CFR

Richemont (CFR) is the world's second-largest supplier of luxury goods controlled by the Rupert family in Stellenbosch. Its sales are entirely located overseas so it is an excellent rand-hedge. Its luxury brands include Mont Blanc, Cartier, Lancel, Jaeger-LeCoultre, Van Cleef and Piaget. It has boosted online sales to 21% of turnover by acquiring Yoox-Net-A-Porter (YNAP), Watchfinder, a UK online group and entering into a joint venture with the online giant Alibaba, to develop apps to penetrate the Chinese market and offer its line of luxury goods. At the same time, its luxury goods are offered through Alibaba's Tmall Luxury Pavilion. Richemont is a company which is directly linked to the recovery of the world economy following the pandemic. While the company sales clearly took a hit from COVID-19, we expect them to continue rising, especially now that it is aggressively offering its products online. This share is also impacted by the slowdown in the Chinese economy and the developments in Central and Eastern Europe. It will benefit from the recovery in the world economy but will be impacted by changes in the strength of the rand. In its results for the six months to 30th September 2023 the company reported sales up 6% and operating profits from continuing operations down 2% in actual exchange rates. The company said, "Jewellery Maisons achieving 10% sales growth at actual exchange rates (+16% at constant exchange rates) and delivering a 35.5% operating margin * Specialist Watchmakers contracting sales by 3% at actual exchange rates (+3% at constant exchange rates) and achieving a 19.7% operating margin." In a sales update on the third quarter ending on 31st December 2023 the company reported sales up 8% with growth across most regions, especially in Japan. This share has been falling since its peak in May 2023, but now appears to have found some support at around R2163 per share. It is clearly a rand hedge, but it is dependent on the Chinese consumer.