South African billionaire Johann Rupert faces Richemont share slide as jewelry growth cools

South African billionaire Johann Rupert is facing fresh investor scrutiny after shares in Richemont, the luxury group he controls, fell as much as 9% on Friday as slower growth at its jewellery division overshadowed stronger-than-expected quarterly sales.

The Swiss-based owner of Cartier, Van Cleef & Arpels, Buccellati and Vhernier reported second-quarter sales of €5.95 billion ($6.58 billion), up 13% from a year earlier and ahead of analysts' consensus forecast of €5.89 billion. But jewellery sales, the group's largest business, rose 14% to €4.41 billion ($4.88 billion) at constant exchange rates, below analysts' expectation of 16% growth.

The market reaction exposed the pressure on Richemont to sustain the rapid expansion that has helped it outperform a luxury industry weakened by softer demand in China and more cautious spending by aspirational consumers. Richemont shares were down 4.7% at 10:45 GMT after falling as much as 9% earlier in the session. The intraday decline should not be treated as the closing performance.

Rupert, Richemont's chairman and controlling shareholder, defended the group's pricing approach, saying it had the ability to raise prices but did not want to become excessive. Chief Executive Nicolas Bos told analysts that long-term demand for jewellery remained positive and that sales growth was being supported by higher volumes, rather than price increases alone.

The latest figures mark a moderation from the first quarter, when Richemont's sales increased 20% at constant exchange rates. The slower pace does not amount to a contraction: the company still recorded double-digit growth in its second quarter, and its total sales exceeded market expectations. The concern for investors is whether jewellery demand can continue to carry the group as growth normalises.

Regional performance offered some support. Sales increased by at least 15% in the United States, Japan and Europe, while Hong Kong and Macao improved. Mainland China remained soft but stable, Bos said. Richemont has also reduced its exposure to tourist spending to about 15% of total sales since the COVID-19 pandemic, shifting more of its business towards local customers in key markets.

For the six months ended September 30, Richemont reported group sales of €12.28 billion ($13.58 billion), up 16% at actual exchange rates. Operating profit increased 33% to €3.1 billion ($3.43 billion), while net profit rose 39% to €2.53 billion ($2.80 billion) from €1.81 billion ($2 billion) a year earlier.

The company said operating profit included €229 million ($253 million) in positive one-time tariff-related items. Excluding those items, operating profit was €2.9 billion ($3.21 billion). The adjustment provides a more representative view of the group's underlying operating performance.

Jewellery remained the group's strongest division over the half year. Sales at its Jewellery Maisons rose 18% at actual exchange rates and 19% at constant rates, while specialist watchmaker sales increased 9% at actual rates. The figures underline the importance of Cartier and the other jewellery houses to Rupert's luxury business, even as the latest quarterly growth rate fell short of expectations.

Investors also looked for clarity on Richemont's possible involvement in a consortium seeking a stake in diamond producer De Beers. Rupert declined to confirm whether the group was considering an acquisition, saying no decision had been made and that any diamond investment would not materially affect Richemont's balance sheet or profit and loss account.

Rupert, 76, also offered limited detail on succession after his son Anton was appointed co-deputy chairman in September. He said the transition was already underway but did not provide a timetable for a change in the chairmanship.

Richemont's results leave investors weighing two different signals: the group continues to deliver strong sales and profit growth, but its most important division is expanding more slowly than analysts had expected. For Rupert, the immediate challenge is to convince the market that the jewellery business can maintain its appeal without relying on ever-higher prices.