Reporter | Huang Shan
Edit | Lou Shuqin
On January 24, Kering, the parent company of Gucci Gucci, announced that it had agreed to sell its holding subsidiary, Sowind Group, to its current management. Sowind Group owns two Swiss haute couture watchmaking brands, Girard-Perregaux and Ulysse Nardin.
The transfer transaction is expected to close in mid-2022. In a media statement, Kering said the deal "is in line with Kering's strategy, including prioritizing brands that have the potential to become assets of scale, as well as prioritizing brands that the group can significantly support for some time to come." ”
This marks Kering's decision to let go of the high-end watch business with average market performance as it seeks the next stage of growth and focus more on other luxury brands that can bring sustainable growth to the group. At present, Kering Group has a number of high-end fashion brands such as Gucci, Balenciaga and Bottega Venetta, as well as many boutique jewelry brands such as Qeelin, Boucheron and Pomellato.
Since the outbreak of the new crown epidemic in 2020, the Swiss watchmaking industry has suffered a huge blow, and total exports have shown negative growth for several months. As the retail market in different parts of the world has recovered, Swiss watch exports have gradually begun to recover. In this process, the market performance of the top Swiss watchmaking brands is particularly outstanding, with Rolex, Patek Philippe, Omega, as well as Cartier and IWC under the Swiss Richemont Group eating more market share.
According to the Swiss Watch industry research report jointly released by investment bank Morgan Stanley and Swiss consultancy LuxConsult, the global "watch king" in 2020 is Rolex, recording revenue of 4.42 billion Swiss francs, accounting for 24.9% of the market share. Cartier Watches is also expected to achieve revenue of CHF 1.63 billion, representing a market share of 6.7 per cent.
In contrast, Kering's watch business has a much weaker presence in the market. In the third quarter of 2020, due to the impact of the new crown epidemic, Girard-Perregaux and Nardin were forced to cut production, and their management company Sowind Group also decided to lay off employees, accounting for a quarter of the total.
According to J.P. Morgan's market analysis report, Nardin sold a total of 9,000 watches in 2020, with an estimated revenue of 40 million Swiss francs, accounting for only 0.2% of the global professional watchmaking market share and ranking 45th among all Swiss watchmaking brands. The revenue of the sister brand Girard-Perregaux does not even rank in the top 50 in the world.
It is worth noting that another brand under the Kering Group that entered the top 50 list of global watch sales is Gucci, which sold 220,000 gucci fashion watches in 2020, with a total estimated total of 160 million Swiss francs, with a market share of 0.9%, ranking 25th in the global market.
Gucci is Kering's most important main brand, generating more than 90% of the Group's operating income. Kering's other haute couture brands, although small, have shown good growth in the past year.
In the earnings report, Kering group attributed brands other than Gucci, Yves Saint Laurent and Boldie under the "Other Brands" business segment and did not provide specific sales data. But in the first three quarters of fiscal 2021, the group repeatedly said that the market performance of other fashion brands and fine jewelry brands was good. In contrast, girard-Perregaux and Nardin watch are usually in the watchmaking business segment, and the performance status is blurred.
In fact, in the early years, Kering Group wanted to make up for its shortcomings in the field of professional watchmaking. From 2011 to 2014, Kering acquired Girard-Perregaux and Nardin, which is seen as Kering's efforts to form a supply chain for haute horlogerie and to compete for market share in the hard luxury sector.
With the support of Kering, Girard-Perregaux and Nardin plan to rebrand and optimize their channel networks, including new product development, optimisation of retail networks and much more. In the above-mentioned statement, Kering mentioned that in the years since the acquisition of Girard-Perregaux and Nardin, the Group has helped it "to have an adequate distribution network, including the opening of direct stores and the strengthening of ties with leading watch distributors." ”
However, the above market research report shows that 90% of Nardin's revenue in 2020 will come from dealer channels. It means that after many years, the direct sales channel of Nardin Watches has at least not been as planned as originally said to the outside world.
It is not difficult to see that although Kering has supported Girard-Perregaux and Nardin during the COVID-19 epidemic and tried to improve its business, its market performance has indeed made Kering impatient, which is desperate to find new growth points.
"Kering has been experiencing difficulties in the haute horlogerie category, and exiting the watchmaking market, which is still in the recovery stage, is likely to be the best solution for Kering, as the company's market share in this area is much smaller than that of other big competitors." Luxury industry analyst Luca Solca at boutique investment bank Bernstein told Reuters that Kering's move was a "positive" step.