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Valuing Compagnie Financiere Richemont Through 'The Cult Of The Luxury Brand,' Part 1

Xinyun Hang profile picture
Xinyun Hang


  • In a previous article, I described how The Cult of the Luxury Brand offers us a model for estimating the growth of luxury companies in Asia.
  • We will now apply that model to Richemont, one of the largest personal luxury goods companies in the world.
  • To apply this model, we first need to calculate where Richemont's customers come from.
  • This requires us to apply global trends in personal luxury goods sales to the company's sales around the world.
  • Once we have done so, the next step is to predict the company's growth by forecasting the development of its per capita sales in each region.

The Cult of the Luxury Brand - Cover

In my recent article on The Cult of the Luxury Brand, I described how Radha Chadha and Paul Husband’s book could be used to predict the luxury industry’s growth in Asia.

Their book describes how Asian countries’ luxury goods consumption grows through a series of stages, as detailed in their “Spread of Luxury” model. Each stage corresponds to both a different level of economic development and a different level of luxury consumption. Those stages range from “Start of Money,” in which few consumers purchase luxury goods, to “Way of Life,” in which a country’s luxury market is fully saturated. According to Chadha and Husband, the “Way of Life” stage is the end stage for Asian markets as they become fully developed.

The “Spread of Luxury” Model



Places at this Stage


  • Authoritarian Rule
  • Poverty and deprivation

Start of Money

  • Economic growth
  • Masses buy white goods
  • Elites start buying luxe

India, Indonesia, Philippines

Show Off

  • Acquire symbols of wealth
  • Display economic status

Mainland China, Malaysia, Thailand

Fit In

  • Large scale adaptation of luxe
  • Fueled by need to conform

Taiwan, South Korea

Way of Life

  • Locked into luxe habit
  • Confident, discerning buyers

Japan, Hong Kong, Singapore

Source: The Cult of the Luxury Brand

In the book, the major market that best defines the “Way of Life” stage is Japan. Japan has the highest per capita luxury goods consumption of any major market in Bain & Company’s Fall-Winter 2016 Luxury Goods Worldwide Market Study. If the “Spread of Luxury” model is accurate, per capita luxury goods consumption should increase in Asian markets outside of Japan until it approaches Japanese levels.

In my article introducing The Cult of the Luxury Brand, I described how this process of per capita luxury consumption increasing towards developed country levels is

This article was written by

Xinyun Hang profile picture
My name is Xinyun Hang, though I go by Charles Hang. I'm a value investor who focuses on companies with high free cash flow yields, especially those that are trading at a low EV/FCF (enterprise value to free cash flow) ratio. I live in St. Louis, Missouri, where I am employed as a data quality engineer and study engineering as a graduate student.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The Amazon links in this article are associated with my Amazon Affiliates account. If you purchase items through those links, I will receive a small commission, but there will be no additional charge to you.

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