CHARGEURS: A Luxury Company?
Chargeurs is a French holding company which is in the midst of a strategic change. Chargeurs was originally a traditional holding company with five business units. Now it has reorganized its operations around two strategic segments - technology and luxury. This is a significant strategic shift for a company that has gone from a traditional holding company to support services to an up-and-coming luxury player. It is definitely a stock to watch according to our analyst.
The new Chargeurs Luxury moniker encapsulates 3 business lines: Luxury fibres (ex Wool), Chargeurs Museum Studio and Chargeurs Personal Care to which are now added a raft of recently acquired personal luxury brands. Through its numerous acquisitions in recent years, Chargeurs aims to become the leading player in museum services through CMS (Chargeurs Museum Studio). Chargeurs seek to intervene at every level of the museum’s decision-making chain, from project management, design and building to audiovisual content production and even the publication of art books. The group recently acquired Skira, a renowned publisher of classic and modern art and design books. During its analyst day on September 8th, Chargeurs made a show of what its CMS unit can deliver to the National Army Museum: it redesigned the customer experience and turned an old and dull museum into an attractive one. Chargeurs Museum Solutions (CMS), has grown from a very small segment to one that is expected to generate €200m in revenue by 2025.
Through its Luxury Fibers division, and more specifically through its Nativa label, Chargeurs has been capitalizing on luxury trends, including the positive implications of stricter ESG practices. The Nativa label is a label that allows for the traceability of premium wool and offers quality wool that guarantees responsible practices and regenerative agriculture. Today, although not yet a high-margin business, the label is growing and Chargeurs has offered its solutions to several brands including Gucci, and Stella McCartney which uses Nativa in its story-telling to its customers. Chargeurs is looking to increase the label’s visibility; the company expects that the traceability and sustainability services will help transform a low-margin business into a double-digit-margin business. That will not happen overnight as the group must be able to sell its wool at a premium in order to cover the extra costs. In short, the group intends to transform CLF’s model from pure trading to a value-added model through Nativa’s services including regenerative agriculture that helps luxury brands to reduce their emissions.
Finally, the development of Chargeurs’ luxury goods division will be propped up by the company’s two recent acquisitions, Swaine brand, acquired in 2021, and the Cambridge Satchel, acquired in August 2022. Swaine is a leading British luxury goods company that has been active in leather goods, umbrellas and millinery for over 270 years. Again, Chargeurs is undertaking a remarkable job of updating the brand’s positioning from one focused on the image of English Gentlemen to one that is also youth-oriented and aimed at women.
It doesn’t end here, but Chargeurs is trying to premiumize all its offerings. It is moving from low-added value activities to high ones. For example, at Chargeurs PCC (technical components to the textile industries), as the end of formal wear became apparent, changing macro-trends increased demand for athleisure, digitally native brands and the luxury market, enabling the division to redefine its offering. The same is true of Chargeurs Advanced Materials, which has moved from simple protective films to more sophisticated products and high-end solutions associated with the environmental transition. The division is now positioned in higher value-added surface solutions.
Chargeurs has effectively made it clear that its next step is a quantum leap into Luxury or something close. We conclude that this about-face may come in the next few years. Since 2015, Chargeurs, with Michaël Fribourg at its head, has already made five acquisitions in its technology division and 10 in its luxury division, but the group is now thinking big. Chargeurs has its sights set on larger acquisitions that would recategorize it as a luxury player. As the group has no specific constraints from its leading shareholder, Columbus Holding, an acquisition of a target with above €150m in sales, entirely debt financed starting from existing drawing rights could ‘overnight’ help build a NAV with a clear luxury tilt. As stated in Chargeurs’ communication back in July 2022, such a move would help to achieve balanced contributions in terms of ROP from the Technologies and Luxury Activities by 2025. In essence, Chargeurs is letting the market know that it is on the verge of a radical strategic shift, from a holding company and support services to a luxury player, with a pool of management talent to back a fairly rapid pivot. Why not.
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