Richemont Upgraded by RBC on Strong Jewellery Sales, Earnings Outlook

RBC Capital Markets has upgraded Swiss luxury group Compagnie Financière Richemont to "Outperform" from "Sector Perform," citing robust performance from its Jewellery Maisons and an expected shift toward accelerated earnings growth. The broker also raised its price target on the company's stock to CHF 220 from CHF 200, pointing to a strong first-quarter update as a key catalyst for its more bullish outlook.

A New Phase of Growth

RBC stated that while Richemont's recent investment case was driven by revenue growth, its earnings had been largely range-bound between CHF 6-7 per share. The broker now believes the company is entering a "new phase of earnings growth," forecasting adjusted EPS growth of 21.2% in fiscal 2027 and 12.9% in fiscal 2028.

This optimistic forecast is underpinned by several factors, according to RBC:

• Operating Leverage: Visible revenue growth is expected to improve profitability.
• Easing Headwinds: Foreign exchange impacts that reduced fiscal 2026 margins by approximately 300 basis points are expected to neutralize.
• Cost Pressures: Raw material cost pressures, which created an estimated 260-basis-point headwind in fiscal 2026, are also easing.

Following its analysis, RBC raised its fiscal 2027 organic revenue growth forecast for Richemont to 11.8% from a prior 8%. The broker also increased its EBIT forecast to €5.58 billion and its adjusted diluted EPS forecast to CHF 7.46, both representing a 7% increase from previous estimates.

Jewellery Division Drives Outperformance

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The upgrade was prompted by Richemont's first-quarter fiscal 2027 sales report, where group revenue reached €6.33 billion, a 20% increase at constant exchange rates. The performance was led by its Jewellery Maisons division, which includes brands like Cartier and Van Cleef & Arpels.

The jewellery unit's revenue surged 24% to €4.73 billion, significantly outpacing sell-side consensus expectations of 13% growth. RBC noted that this growth was driven largely by volumes, which it estimated contributed 11 percentage points to the increase, alongside favorable pricing and product mix.

Market Position and Valuation

RBC highlighted that Richemont's jewellery brands continue to outperform peers in the soft luxury sector. The broker sees structural factors supporting the category, including wealth creation effects and increased self-purchasing by women, as disproportionately benefiting the group.

While growth is expected to moderate against more challenging comparisons, RBC anticipates Richemont will continue to deliver stronger growth than much of the luxury sector. The broker noted that the stock trades at approximately 26 times calendar 2027 earnings, a valuation it considers fair on a growth-adjusted basis and supported by what it described as the highest return on invested capital in its coverage universe, excluding Hermès.