GENEVA – Regardless of hovering temperatures at this 12 months’s Geneva Watch Days, Swiss executives struggled to dispel the chilly winds which have chilled the trade in current months. Following file highs in 2022 and 2023, gross sales of Swiss watches have slowed sharply. Export values have dropped, producers are freezing orders, and retailers are grappling with unsold inventory amid China’s ongoing financial droop and waning curiosity from each occasional consumers and watch-flipping speculators worldwide.
Sowind Group, guardian entity of the heritage Swiss manufacturers Ulysse Nardin and Girard-Perregaux, has even furloughed staff as a result of slowdown, leaning on a state program to keep away from definitive job cuts.
Nonetheless, the group’s chief govt Patrick Pruniaux, 52, is placing on a courageous face, seeing alternative on the opposite aspect of the trade’s present droop.
“The watch market shouldn’t be collapsing,” Pruniaux informed Enterprise of Style final week. “It’s normalising. We’re now going to undergo a few quarters that will likely be more difficult, however medium-term, long-term, no problem. Shoppers nonetheless spend a really important sum of money and have quite a lot of ardour for luxurious watches.”
Two and a half years in the past, Pruniaux made headlines by main a administration buyout of Ulysse Nardin and Girard-Perregaux from Kering, positioning himself as a key participant in navigating the trade’s present challenges. The buyout got here after Kering determined to divest from its watchmaking unit which, regardless of its manufacturers’ wealthy watchmaking histories, remained a distinct segment side-show within the French group’s portfolio of style mega-brands like Gucci and Saint Laurent. Neither Kering nor Sowind Group disclosed a sale determine, although Kering reported solely €29 million ($32 million) of capital good points from asset disposals in its July 2022 half-year report.
Initially, Pruniaux’s funding regarded a great wager as a post-pandemic surge in luxurious watch gross sales left most of the trade’s best-known manufacturers unable to fulfill demand. Having been within the doldrums for years, Girard-Perregaux discovered itself working ready lists on its Seventies Laureato sports activities watch.
However these days are over. Swiss watch exports are down 2.4 % by worth and eight.4 % by quantity this 12 months in keeping with the Federation of the Swiss Watch Business. Luxurious teams reported declining revenues over the summer time, with Swatch Group (guardian firm of Omega, Longines and Harry Winston) recording a 14.3 % fall in first-half revenues and a 70.5 % drop in web revenue.
Sowind is reported to have furloughed as a lot as 15 % of its workforce, despite the fact that in keeping with Pruniaux throughout the 2 manufacturers revenues this 12 months are “flattish”, with Ulysse Nardin up by a single-digit proportion He mentioned the Swiss furlough scheme had enabled the corporate to “safe our workers having elevated manufacturing groups by 10 to fifteen per cent in the previous couple of years.” He added that “furlough demonstrates completely our dedication to plan for progress and nurture inside experience with a long-term view.”
One trade analyst mentioned most Swiss watch corporations could be delighted with a flat 12 months. “On common, the trade will likely be down 5 % this 12 months,” mentioned Oliver Müller, founding father of the Swiss consultancy LuxeConsult and co-author of Morgan Stanley’s influential annual watch report. “Some manufacturers are already down double digits, as a lot as 30 % [but] we’re evaluating in opposition to a file 12 months.”
“We’re debt-free and worthwhile,” Pruniaux mentioned, noting that he was not in search of additional funding at the moment. “I really feel we’re beating the market considerably.”
Nonetheless, with the trade in flux and short-term good points laborious to come back by, questions will likely be requested in regards to the prospects of Pruniaux’s manufacturers.
Girard-Perregaux was based in 1791 and is among the world’s most established luxurious manufacturers. But it surely and Ulysse Nardin proceed to take a seat in a clumsy center floor between world luxurious watch names like Patek Philippe, Audemars Piguet and Richard Mille and Switzerland’s high-end area of interest gamers, which are a magnet for collectors with uncommon hand craftsmanship and ultra-low volumes.
Pruniaux mentioned Girard-Perregaux and Ulysse Nardin are on monitor to promote round 20,000 timepieces this 12 months at a mean promoting value of round 21,000 Swiss francs ($24,785), implying a turnover of 420 million Swiss francs ($495 million), which Müller mentioned would give Sowind Group estimated annual revenues of round 160 million Swiss francs ($189 million) as soon as wholesaler markups are taken into consideration. That’s in comparison with turnover of over 1.8 billion Swiss francs ($2.1 billion) for the likes of Patek Philippe or 2 billion Swiss francs ($2.4 billion) for Audemars Piguet (to not point out sector-leader Rolex’s 9.3 billion Swiss franc ($10.9 billion) revenues), in keeping with Morgan Stanley estimates.
Pruniaux mentioned he doesn’t see Sowind’s manufacturers as immediately competing with the massive title gamers and that he was completely satisfied to enchantment to prospects in search of high-end watchmaking above model clout. “They’re nonetheless in watchmaking, however they went to a different stage a lot that they might simply as properly be in one other trade,” he mentioned. “I’m clearly within the watch enterprise.”
He continued: “I belong to that league [with Patek], however I’m not concentrating on it. Our goal is to have distinctive, unique merchandise. We all know we’re not the primary watch, and we don’t attempt to be. We’re clearly extra for those that have a real curiosity in watches and should not in search of standing solely.”
Pruniaux is ready to leverage claims of each hand-craftsmanship and sustainability because of an ultra-local Swiss provide chain. Excluding uncooked supplies, he mentioned the overwhelming majority of parts for the corporate’s watches are sourced inside 100 kilometres of its manufacturing headquarters in La Chaux de Fonds.
In an trade that tends to remain quiet about sustainability, Pruniaux is interesting to customers with enhancements to its supplies sourcing, too, advertising Ulysse Nardin’s Diver NET watch circumstances as being fabricated from 95 % recycled metal.
Pruniaux mentioned his manufacturers would take a cautious method to pricing, acutely aware of consumers’ notion that current trade value hikes had been “generally unjustified”. “My goal is equity,” he mentioned. “Once you purchase a product from us, you’ll know 20 years from now that you just paid a great value.”
Kering appointed Pruniaux in 2017 after a stint launching the Apple Watch within the UK and Eire. Earlier than that, he labored for LVMH as TAG Heuer’s vice-president of gross sales and retail. Would he nonetheless have led the buyout from Kering if he’d identified how shortly the market would flip?
Pruniaux mentioned he and his buyers had deliberate for a droop. “We anticipated it,” he mentioned. “In 2022, when the market was at its peak, we may in all probability have offered two or thrice extra [watches] than what we offered, however we made the choice that we might miss some gross sales.” He mentioned they’d opted to not improve manufacturing, a state of affairs that might have left them managing decline within the occasion of what they noticed as an inevitable downturn.
For now, his buyers are prepared to be affected person. Backers of the 2022 buyout had been break up into three teams: Pruniaux and chief operational and monetary officer Alain Sponem are the bulk shareholders; joined by a block of different senior executives and outdoors buyers that largely embrace household places of work.
“We have now household places of work and never, for example, personal fairness as a result of they’re long-term,” he mentioned. “These buyers are investing within the mission and the imaginative and prescient. Quarterly outcomes are virtually of no curiosity to them.”
Independence has allowed Sowind to keep up moderately than improve manufacturing ranges lately, making it simpler for the corporate to navigate the present slowdown, Pruniaux mentioned. “Non-public fairness would search for a return in 5 years, however the problem of the luxurious watch trade is that even if you happen to’re satisfied you’re going to carry out, you don’t understand how properly or when.”
Even so, it isn’t all rosy outdoors an enormous group. “We miss the visibility you could have out there and the understanding of the tip shopper [from a large group],” Pruniaux mentioned. “Giant teams are analytical they usually perceive creativity. And so they virtually power rationality on you, supplying you with construction.”
Rising costs and the ubiquity of smartwatches and smartphones have been blamed for falling export volumes for Swiss watches, as many youthful customers flip to linked gadgets or select to not put on a watch in any respect.
However Pruniaux says his prospects have continued to skew youthful since a brand new technology received hooked on watches throughout the pandemic. “Previously six or seven years, for each manufacturers, we noticed the typical age of the client taking place 10 or 15 years to late 30s, early 40s,” he mentioned.
This, he mentioned, gave him room for optimism. “A watch could be very related on this world,” he mentioned. “Not solely from a sustainability viewpoint: customers anticipate craftsmanship, authenticity, emotion and comfort, and we ship it. The subsequent 15 years are going to be very fascinating for this trade.”
