Kering abandons Swiss watch brands Girard-Perregaux and Ulysse Nardin – WWD
PARIS – Kering is exiting the specialist watch category, where it has failed to gain ground against its biggest rivals LVMH Moët Hennessy Louis Vuitton and Compagnie Financière Richemont.
The French luxury goods group revealed on Monday the sale of Girard-Perregaux and Ulysse Nardin, operating under the umbrella of the Sowind group, to their current management, a decision which it says is in line with its strategy of prioritizing its brands “with the potential to become important assets within the group.
“Kering is likely making the most of a recovering watch market to exit a category where it was suffering, given its smaller relative position against larger competitors in this space,” wrote analyst Luca Solca. at Bernstein. “The decision is positive, in my view, as it makes up for losses on this front and focuses senior management on more important issues.”
Market speculation had been rife for some time about the future of the business, in which Kering lacked critical size.
“Kering is quite small in the watch market, which has an impact in terms of distribution, because it’s more difficult,” Kering chief financial officer Jean-Marc Duplaix told analysts on the third-party conference call. quarter of the company in October.
He acknowledged the significant progress made by the Girard-Perregaux and Ulysse Nardin teams in improving their offering and distribution as well as increasing brand visibility and awareness in the recent past.
The former has launched a co-branded product with luxury car maker Aston Martin, while the latter has partnered with the Vendée Globe sailing race.
“I’m very confident that these brands can improve their trajectory, they are great brands with a very good reputation,” said Duplaix.
“On the solid foundations laid thanks to the support and investments of Kering, we have the configuration and the resources necessary to implement a plan capable of ensuring the long-term development of the two brands”, declared Patrick Pruniaux, who has been CEO of Girard-Perregaux and Ulysse Nardin since 2018.
A year ago, the market was flooded with rumors of a possible merger between Kering and Richemont that would have allowed them to beef up against LVMH’s acquisition of Tiffany & Co. Richemont founder and chairman Johann Rupert said denied any merger plans. but said the two companies had talked about collaborating. In October, they announced they would be working with the Responsible Jewelry Council to set 2030 sustainability goals for the watch and jewelry industry.
While the divestiture – which also includes the labels factory in La Chaux-de-Fonds, Switzerland, as well as the JeanRichard brand – signals an exit for the company from specialist watch brands, Kering will continue to offer high-end timepieces. range under Gucci as well as jewelry brand Boucheron, a company spokesperson said.
Gucci unveiled its first high-end Swiss-made watches last year to coincide with the brand’s centenary, as reported.
While its competitors have benefited from renewed demand for high-end Swiss watches, Kering’s business in the segment has not returned to pre-pandemic levels in the first nine months of 2021, despite strong year-over-year gains.
“There are a lot of encouraging signs, not just in terms of revenue, but also in terms of the quality of the offering, the quality of distribution which has improved significantly,” Duplaix said in October. “I think the team working on Ulysse Nardin and Girard-Perregaux is doing a great job, the visibility of the brands has increased considerably, so we are very happy with a lot of initiatives.”
“Given its limited exposure to hard luxury, Kering has struggled to develop the potential of these two brands, which are expected to be loss-making,” wrote Carole Madjo, luxury goods analyst at Barclays, in a research note on Monday. “Both brands were also particularly affected by the pandemic in 2020.”
Madjo cited an estimate from Euromonitor that puts the business’ annual revenue at around 260 million euros.
While Kering failed to rebound in the category, by contrast, Richemont’s specialist watch arm saw sales rise 29% on a reported basis in the three months to December compared to the period in the previous year, reaching 977 million euros, or 19% gain over the same period in 2019.
In the six months to September, its sales grew 7% on a two-year basis as the company reaped the benefits of shifting to a direct-to-consumer model.
While LVMH does not detail sales of its watches, its watches and jewelry business grew 4% in the first nine months of 2021 on an organic basis (excluding the Tiffany acquisition), compared to the same period in 2019.
Kering (then PPR) entered Sowind Group and Girard-Perregaux, which dates back to 1791, in 2008, acquiring a majority stake in 2011. It bought the Ulysse Nardin brand in 2014, and the businesses of the two were merged into 2019.
In September 2020, the business laid off 100 employees – around a quarter of its workforce – as it cut production in the wake of the coronavirus.
Kering said the financial impact of the sale would be disclosed in its 2021 accounts and the transaction is expected to be finalized in the first half of 2022. The French company will publish its 2021 annual results on February 17.
Known for being on the lookout for M&A activities, this concentration on its core business could pave the way for new acquisitions. “Kering has ambitions to grow, both organically and through acquisitions,” Solca wrote. “Not in watches, though.”
Kering shares fell 2.98% to 648.90 euros on the Paris Stock Exchange on Monday.
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