Richemont Earnings: Still Solid, but Moderating Growth as Currencies Weigh; Shares Cheap

We maintain our fair value estimate of CHF 154 for wide-moat Richemont as the firm reported solid, but slowing growth in the fiscal second quarter. Revenue came in at 12% at constant exchange rates for the first half with a 5% increase in the second quarter, below 19% delivered in the first quarter. Overall, Richemont confirmed the slowing luxury industry growth trend while a weakening margin was viewed negatively by the market, sending shares 7% lower. We think shares look cheap based on our assumptions for long-term revenue growth of 6% and some margin expansion. We see cyclical weakness as an opportunity to build a stake in this very high-quality stock.