Diamonds are forever. Growth isn’t.

Selling billions of dollars’ worth of jewelry isn’t enough to keep Wall Street happy anymore. Richemont, the Swiss luxury giant behind Cartier and Van Cleef & Arpels, reported a 13% jump in quarterly sales today, beating expectations. And while the company’s first-half profit soared 39% to roughly $2.8 billion, shares dropped more than 4%.

Why’s that? Wealthy shoppers haven’t stopped buying jewelry. But Richemont sales weren’t growing quite as fast as investors hoped, while years of industry-wide price hikes have increasingly divided luxury consumers into those who can still afford to splurge and those who can’t. As it turns out, even the industry’s brightest diamonds can lose their luster.

The luxury divide

Richemont’s jewelry business, which generates roughly three-quarters of group sales, grew 14% last quarter, below analysts’ expectations of 16% and down from 24% the previous quarter. Still, Cartier and Van Cleef remain standouts in a struggling luxury industry, partly because their wealthier customers are less vulnerable to rising living costs.

That division is becoming especially visible ahead of the holidays. A new Visa survey finds that roughly a third of Americans earning under $100,000 plan to switch to cheaper brands or stores this season. Visa expects holiday sales to climb 4.5%—but just 1.1% after adjusting for inflation.

It’s a familiar problem for luxury brands. TD Cowen estimates that while aspirational shoppers account for 65% of US luxury spending, years of inflation have squeezed their budgets. Jewelry, which skews toward wealthier buyers, has consequently held up better than handbags and accessories.

That makes Richemont one of TD Cowen’s preferred luxury stocks. Still, today’s selloff shows that even the sector’s winners aren’t immune to slowing growth.

All that glitters…costs more

Luxury brands have spent years relying on higher prices to boost sales. McKinsey estimates that roughly 80% of luxury market growth between 2023 and 2025 came from price increases rather than higher sales volumes. But that strategy has limits, especially when production costs are climbing, too.

Richemont’s first-half gross margin rose to 66.5%. Excluding a roughly $253 million one-time tariff-related gain, however, it actually fell 70 basis points as higher gold costs squeezed the company’s profitability. Price hikes and a more profitable product mix couldn’t fully offset those expenses.

The thing is, you don’t need to own a Van Cleef & Arpels Alhambra necklace to see what’s happening. Luxury brands spent years convincing shoppers that higher prices meant greater exclusivity. Now investors are asking whether those price hikes have come at the expense of future customers.

With holiday shoppers trading down, retail’s next winners may be the companies that can attract more buyers without slashing price tags or sacrificing margins. Turns out, pricing power only works if someone is still willing to pay.—HC