Richemont (XSWX:CFR, Financial), which counts Cartier and Van Cleef & Arpels among its maisons, has a very large exposure to the Chinese luxury market, which has been hurt by curbs on international travel. In addition, recent rhetoric from the Chinese Communist Party has suggested a renewed focus on the “common prosperity” of its population and raised concerns among equity investors about the potential impact this could have on the spending habits of wealthy Chinese, many of whom likely recall the personal uncertainty that surrounded the country’s anti-corruption campaign launched in 2018. Though the degree to which China’s redistribution efforts will impact the revenues of luxury retailers like Richemont remains unclear, a broadening of economic growth could increase disposable income within the country’s middle- and upper-middle -class cohorts, aspirational buyers that typically serve as drivers of luxury sales volumes.
From First Eagle Investment (Trades, Portfolio) Global Income Builder Fund's third-quarter 2021 commentary.
