The news: Cartier owner Richemont beat sales expectations for the quarter ended June 30, as wealthy shoppers weary of price hikes on designer handbags and apparel opted to spend their money on jewelry instead.

• On a constant currency basis, sales in its fiscal Q1 rose 6% YoY to €5.41 billion ($5.85 billion), outpacing the consensus estimate of €5.37 billion ($5.81 billion).
• Sales for the jewelry business, which includes Cartier and Van Cleef & Arpels, jumped 11% YoY, well ahead of expectations for 8.6% growth.

Zoom out: With handbag prices up as much as 30% to 40% since the pandemic, even customers with the funds to spare are reconsidering what’s worth the splurge. Categories like jewelry are seen as a better long-term value.

• Monthly spending on luxury jewelry among US consumers has been increasing steadily on a YoY basis since September, according to a Citi analysis of credit card data. May was a particularly strong month, with sales up 10.1% YoY.
• In addition to consistently outperforming categories like leather goods and ready-to-wear, jewelry was the only luxury category to record an overall increase in the number of customers. That’s particularly notable since fewer people are in the market to buy luxury goods.

Our take: Shoppers’ move away from products like Chanel handbags—seen by many as overpriced—and toward items like Cartier Love bracelets that are expected to better hold their value reflects the (partly self-inflicted) challenges luxury brands now face. While lowering prices is not an option for most companies looking to maintain their cachet, brands must justify their increasingly high price point, whether by delivering innovative designs, emphasizing quality and craftmanship, or offering high-touch customer service. In today’s luxury market, prestige is no longer enough.

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