INTERNATIONAL. Luxury goods house Richemont has revealed to The Moodie Davitt Report that its motivation in acquiring a stake of just over 5% in Dufry was to improve its presence across the retail giant’s network.
A spokesperson for the group confirmed the move had been made to aid Richemont’s Maisons’ access to good locations. This was done in the context of anticipated increased travelling with the second machine age.
The “second machine age” is a reference to the use of the latest digital technologies and their impact on the global economy. The first age refers to the application of steam power to industrial processes, followed by a series of innovations that ran through to the 20th century changing the way societies and economies function.
Richemont owns several of the world’s leading luxury goods companies, with particular strengths in jewellery, luxury watches and premium accessories.
The Group’s luxury interests encompass several of the most prestigious names in the sector, including Cartier, Van Cleef & Arpels, Piaget, Vacheron Constantin, Jaeger-LeCoultre, IWC Schaffhausen, Panerai and Montblanc.
Richemont’s view confirms that of Exane BNP Paribas, which (cited by Bloomberg) said earlier: “Richemont’s purchase makes sense, as the luxury goods maker needs more avenues to sell watches at a moment when many ailing retailers hold oversize inventories.”
In other reaction from the investment community, Equity Research house Kepler Cheuvreux said: “We see the move as strategic, with no plan by Richemont to launch a full bid. Richemont has said it believes that travel and airport retail will become an increasingly important distribution channel for luxury goods. We expect the Dufry stock to react positively. Buy.
“Last week, Richemont said that it expected travel and airport retail to be a major driver for the luxury goods industry in the future, given strong secular growth trends” – Kepler Cheuvreux
“We view the move as a strong signal of support for Dufry. Last week, Richemont said that it expected travel and airport retail to be a major driver for the luxury goods industry in the future, given strong secular growth trends.
“We don’t believe Richemont has any interest in a takeover. However, it might seek board representation and work with Dufry in developing its own brands within Dufry’s network. We note that LVMH owns [a majority share -Ed] duty free unit DFS while Swatch Group has expanded into airport retail with a special unit [Hour Passion -Ed] bidding for watch concessions.”
The equity research house said, “We believe HNA remains in the driving seat regarding any potential takeover of Dufry. It has a 17% stake (21% when options are included) in the group [or will have when the transaction closes -Ed], compared to TRI, which has 18.5% (TRI is a shareholders’ pact mostly made up of management and the board). We expect HNA to take a seat on the board and work with Dufry in expanding its China business.
JP Morgan Cazenove commented this week in a note published after its Global Consumer and Retail Conference and a Dufry presentation: “Dufry management welcomes HNA as a new shareholder and will aim to organise a formal meeting in due course to clarify HNA’s intentions. Without any view and only looking factually at existing HNA investments, management observes that ‘for companies the size of Dufry’, HNA has historically taken 10% to 30% minority stakes, requested board representation, and been involved in strategy.”
