Richemont Not As Attractive As LVMH (Luxury Goods Series)

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About: Compagnie Financière Richemont SA (CFRUY), Includes: LVMUY
by: Vineet Naik, CFA
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Vineet Naik, CFA
Long only, bonds, arbitrage, research analyst
Summary

Richemont owns some excellent brands, particularly Cartier and VCA with good returns on capital.

However, almost 40% its business is in watches, which do not earn good returns on capital.

Acquisition of YNAP was a major capital allocation mistake.

Given the valuation, and capital allocation mistakes, LVMH is better positioned than Richemont.

This is the second article in my Luxury Goods series. Please access the first one here. In this article, I provide an overview and analysis of Compagnie Financiere Richemont (OTCPK:CFRUY). I argue