Luxury giant LVMH is seeking to gain share in the global luxury watch business with a newly formed watch division and a range of new, higher-priced models.
According to market research firm IMARC Group, global luxury watch sales are estimated to be around $30 billion this year. It is expected to grow to over $37 billion by 2032 as global wealth rises and Generation Z and Millennials become increasingly interested in high-quality mechanical watches.
LVMH’s jewelry and watches division generated $11.8 billion in revenue in 2023, up 7% in organic growth. The luxury giant now has ten watch brands, including TAG Heuer, Hublot and Zenith, as well as fashion and jewelry brands such as Louis Vuitton, Bulgari and Dior, which also make watches.
Last month, the company named Frederic Arnault, the 29-year-old son of LVMH Chairman and CEO Bernard Arnault, as CEO of LVMH Watches, which includes the TAG Heuer, Hublot and Zenith brands.
Analysts estimate that sales of these three brands reached about $2 billion last year.
A Zenith luxury watch at Watch Week 2024 in Miami.
CNBC
Frederic Arnault, who has launched a number of hugely popular new models at TAG Heuer, is expected to bring his focus on innovation, cutting-edge materials and creative designs to the larger brand group. Analysts believe LVMH could continue to acquire attractive brands as they become available.
In interviews with CNBC during LVMH’s Watch Week in Miami, the brands’ chief executives said 2024 is already shaping up to be stronger than 2023, when rising interest rates and recession fears dampened demand. Executives say they are particularly encouraged by the resilience of the American luxury consumer.
“It’s all about cycles, and the beauty of America is that the cycles are very short,” said Zenith CEO Benoit de Clerck. “We have ups and downs and all that, but I can assure you today that Zenith is definitely on the upswing and has good traction in the U.S. markets.”
Luxury watches from Zenith at Watch Week 2024 in Miami.
CNBC
Watch sales follow a similar pattern to the broader luxury market, where the wealthiest consumers remain the strongest. Executives say the wealthy are less affected by rising interest rates and economic uncertainty, which is why more brands are turning to the “super spenders” and VIP collectors who continue to spend money on the highest quality and craftsmanship.
“The high-end has really been one of the main drivers of our growth,” said Jean-Christophe Babin, CEO of Bulgari. “I think the rich are more interested than ever in investing in authentic, reputable and timeless brands.”
Babin said he sees increasing strength at the high end across all of Bulgari’s businesses, which now include hotels, fashion and fragrances.
“We sold more high-end jewelry, more high-end watches, more high-end bags,” Babin said, showcasing one of Bulgari’s coveted yellow gold Serpenti Secret watches, which retails for $350,000 is.
A Bulgari Serpenti Secret watch at Watch Week 2024 in Miami.
CNBC
LVMH is also targeting the fastest-growing luxury watch segment: women’s watches. While women’s watches only account for about a third of total sales, women’s interest in luxury mechanical watches has surged due to increased social media presence and a growing number of models aimed at women. The world’s increasing population of wealthy women – both self-made and inherited – is also driving sales growth.
“The trend is towards more and more feminine and unisex watches,” said Babin. “Women have more and more power in terms of independence, autonomy and purchasing power. We believe it will stay that way.”
Reinvention
In the highly competitive world of luxury watches, brands must continually innovate in materials, complications and designs to gain market share and retain collectors.
Carrera Plasma Diamant d’Avant-Garde Chronograph Tourbillon at Watch Week 2024 in Miami.
CNBC
TAG Heuer, which has its roots in automobile racing, achieved great success with its Carrera Plasma, which used lab-grown diamonds. The price for the Carrera Plasma Diamant d’Avant-Garde Chronograph Tourbillon is over $500,000 – and the waiting list is more than two years.
TAG Heuer also introduced a teal Carrera Glassbox Chronograph with a teal dial reminiscent of a shade of green used in auto racing in the 1920s and 1930s.
A luxury watch from TAG Heuer at Watch Week 2024 in Miami.
CNBC
Julien Tornare, CEO of TAG Heuer, said LVMH’s advantage over other watch brands and groups is its relentless focus on reinvention and appeal.
“The Swiss watch industry was sometimes quite conservative,” he said. “But at LVMH we are pushed to try new things and move forward. I think if we still want to be attractive.” [a] It is very important for the new generation to show that we are working for the future and not the past.”
Many of the LVMH brands are leveraging their storied past for new designs and models.
Zenith launched its Chronomaster Triple Calendar, a three-calendar moon phase chronograph inspired by its rare 1970 prototype El Primero watch. The company also launched a new Chronomaster Sport in green, the hottest color for luxury watches in recent years.
A Zenith luxury watch at Watch Week 2024 in Miami.
CNBC
De Clerck said part of Zenith’s appeal to younger watch buyers and collectors lies in its price. While Zenith sells highly complicated watches it tries to deliver value, such as the Triple Calendar, which sells for around $14,000 but could likely be priced “thousands higher” depending on the craftsmanship and complications required, he said.
“We have a very good offer in terms of price compared to the competition,” he said. “You get a lot of bang for your buck, and we want to stay and keep that spirit.”
At the same time, many LVMH brands are moving up the price scale with more expensive, limited editions. Hublot, known for its bold, large watches, has just released a $250,000 limited-edition watch called the MP-10 Tourbillon Weight Energy System. Only 50 pieces of the futuristic watch will be produced and it is expected to sell out quickly.
“We call it the art of fusion in watchmaking,” said Ricardo Guadalupe, CEO of Hublot. “We combine the tradition of watchmaking art of over 400 years with innovation. We do this through design, through materials, new mechanics and new ways of making movements.”
—CNBC’s Crystal Lau contributed to this report.
Source link
2024-02-03 14:00:01
www.cnbc.com
