Richemont – last one out turn off the lights!

[PJ S]

A few hours ago, Richemont announced more woes – job cuts by way of 200 highly skilled watchmakers.
This comes only a week and a bit after Chairman Johann Rupert announced he was doing away with the CEO position of each brand.
Redundancies are mostly contained to Piaget and Vacheron Constantin, and adds to the 100 jobs cut earlier in the year, predominantly from Cartier.

First half-year operating profits are down by 43%, at €798M (hardly broke, are they?), and are expecting to add €150M to that figure with the sales of some of their investment properties in Paris, France.

Given the current dire straights that they (and the rest of the Swiss watch industry) are presently facing, and presumably the years ahead, I wonder how it’s all going to end up?
Any thoughts on how this will play out?

http://www.bloomberg.com/news/articl...mid-watch-woes

[JP Chestnut]

I think Richemont produced terrible designs for too many years, while being carried by an incredibly hot market for watches. Their most recent releases are less bad, but still nothing like 2002 or so. It will be interesting to see what happens.

[ansharma]

Interesting- thanks for sharing. The economy is not helping nor the current political situation - all leading to a lot of uncertainty.

I think we will see less innovation and more value for money watches. Brands will try and increase their audience so we may see more diverse ranges targeted at different age groups than previously for each brand.

Cheers
Anuj


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[texex91]

Oh well...not surprised. I do feel sorry for the watchmakers that lost their job and hope they find new employment.

Aside from ALS, none of their brands do much for me.

[RUK]

They will have to adjust pricing if they want to prevent and all out collapse.

The recent price hikes were crazy. It makes it very difficult to justify buying them new. A new watch went up by over 20-30% when the CHF changed and you can buy them for 50-60% off RRP if you look around.

I would expect new models at much cheaper prices and possibly price cuts to help move the current stock.

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[RUK]

They will have to adjust pricing if they want to prevent and all out collapse.

The recent price hikes were crazy. It makes it very difficult to justify buying them new. A new watch went up by over 20-30% when the CHF changed and you can buy them for 50-60% off RRP if you look around.
Thanks
I would expect new models at much cheaper prices and possibly price cuts to help move the current stock.

As for the watch makers- hope Patek hires them to get the services done faster!

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[psv]

It is not really surprising, I think core watch lines are hurting but it is the extra vaganza diamond jewelry business that is really hurting, I suspect.

[lapince]

Too bad for the guys who lost their jobs, like was said I hope Patek hires and trains them to speed up service.
This is normal since Russia is suffering from oil prices and sanctions, and in China there are efforts to cut down on anything too luxurious, watches being the most obvious, when not long ago rich chinese businessmen, politics and celebrities were wearing high horology, now if they do it's often more discreet pieces.
I think that with these two major markets closing down or almost, there is way too much offer and not enough demand, will that change in a few years, not sure, but to keep the market healthy brands should clearly cut down on production, I mean even Patek announced they were cutting down.

[kaiserphoenix]

The price discrepancy is just too high between retail price and 2ndary market. An IWC Portuguese Chronograph is now over £6K in the UK, that is for the standard ETA version, I think thats just outrageous. Not because the 7750 is cr*p, but it used to be like £3800 or so, the price increase has not led to an increase in quality. 6-10 years ago, you could expect as a fresh graduate to perhaps save up to buy an IWC or Rolex Sub as your 1st starter watch, but now I think its impossible, they are both around £6K new and wages have just not kept up. Im not saying wages should keep up with watch prices haha (i wish they did), but Richemont has perhaps been way too bullish in the price increases and priced alot of people out of the market.

[Cru Jones]

A bit over-extended, but they will be fine. Too many great brands not to be.

[1William]

I believe that you will see an adjustment in the market related to prices and production. They are holding off on significant price reductions as are other brands and manufactures. When it starts it will be a free fall for all the brands. It will devastate the second hand market and will require deep pocket to last it out. And I believe all brands will feel the impact.

[capote]

It will be interesting to follow this development. Considering Richemont's wide range of brands I guess they will have an easier time adjusting to the market than say Journe or Patek, on the other hand Richemont is publicly traded and the stock owners might demand results fast.

[Hollister]

Originally Posted by 1William

I believe that you will see an adjustment in the market related to prices and production. They are holding off on significant price reductions as are other brands and manufactures. When it starts it will be a free fall for all the brands. It will devastate the second hand market and will require deep pocket to last it out. And I believe all brands will feel the impact.

Sadly, I agree.

[masyv6]

Originally Posted by RUK

They will have to adjust pricing if they want to prevent and all out collapse.

The recent price hikes were crazy. It makes it very difficult to justify buying them new. A new watch went up by over 20-30% when the CHF changed and you can buy them for 50-60% off RRP if you look around.

I would expect new models at much cheaper prices and possibly price cuts to help move the current stock.

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There are very few Richemont brands that I'd even begin to consider paying near retail for.

[locutus49]

Cartier. Wow.

[slcbbrown]

Almost every luxury item made has to operate in a cyclic market with ups and downs. Once you understand the nature of these businesses, they only matter when a company can't make it through the troughs. I worked in a non-luxury, heavy manufacturing business for about 37 years, and a wise man once told me, "Don't be impressed with your profit making ability in the up cycle-- every idiot makes money, then. It's the down cycle that separates the winners from non-winners. If you can't make it through the downturn, the winners will buy your assets at bargain basement prices".

While I find these "the sky is falling" articles mildly interesting, they are a dime a dozen. Why would anyone think that companies that have been printing money won't have to adjust in a slower market. My guess is that if you find a seasoned watch builder, he can't remember all the cycles, and the only one that is special is the quartz crisis.

[psv]

Well, the US mortgage market is just about to go BOOM with interest rates rising to 5-6%, which will affect the overall economy. The era of cheap/free money is over, which will severely impact the high end watch market as well.

[conkers]

I am doing my bit to support them. Just bought 3 big Jaeger pieces!

[Hollister]

Originally Posted by psv

Well, the US mortgage market is just about to go BOOM with interest rates rising to 5-6%, which will affect the overall economy. The era of cheap/free money is over

And about time, if you ask me.

[fmc000]

Originally Posted by conkers

I am doing my bit to support them. Just bought 3 big Jaeger pieces!

Looking forward for the pics! Congrats in advance.

[p_mcgee]

In 2002, I paid the $3,100 MSRP for my Panerai PAM 48. Just for fun I plugged that into an inflation calculator & it's roughly equivalent to $4,100 in today dollars.

Today's MSRP on the exact same watch is $6,800-- a 66% real price increase. Maybe that kind of pricing strategy can work in a hot market, but the party appears to be over & the lights are now being turned off.

I still love Panerai, JLC, VC, IWC, etc. but it's time to wait for this shake out & search for value in the preowned market. I feel bad for their watchmakers & some of the folks I know in their dealer network.

[conkers]

Originally Posted by fmc000

Looking forward for the pics! Congrats in advance.

One of them will be my most spectacular incoming ever. No mean feat.

[themast]

Originally Posted by conkers

One of them will be my most spectacular incoming ever. No mean feat.

Are you going to top the 4 Patek PCC incoming!?

[lapince]

Originally Posted by conkers

I am doing my bit to support them. Just bought 3 big Jaeger pieces!

Oh that'll be great

Originally Posted by conkers

One of them will be my most spectacular incoming ever. No mean feat.

Wow we should really be in for a treat, maybe the reverso tryptique? Now that is an amazing piece, not a big tourbillon fan but the JLC Gyro ones are amazing.

Thank God we have Roger for regular crazy incomings here

[conkers]

Well it is 3 Jaegers two are wonderful but one is at a different level entirely. 4 PCCs from Patek is obviously hard to top but for a single item one of the 3 Jaegers is leagues ahead of anything I have owned before. It will require a lengthy incoming teaser thread of its own!

[subtona]

No richemont products in my sights.

they had many years of record growth... This is how they repay their employees?

[nick c]

They going to open in Toronto panerai boutique Yorkdale mall

[KarlS]

Originally Posted by subtona

No richemont products in my sights.

Hey had many years of record growth... This is how they repay their employees?

Sadly they are a corporation which is why they will survive!! Decisive action early irrespective of the soft issues like people's livelihoods. When the market picks up they will just offer more money and steal a batch from a competitor!

[997.2TTS]

Originally Posted by subtona

No richemont products in my sights.

Hey had many years of record growth... This is how they repay their employees?

This.. +1


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[Orangejoe]

Originally Posted by subtona

No richemont products in my sights.

they had many years of record growth... This is how they repay their employees?

Do you think the market (see the other posts here in this thread) cares?

Do you think anyone considering their pieces is going to say "Hey, contrast this with Hayek Jr.'s statement s of retaining their workforce over at Swatch Group . I'm by one of their pieces instead!"

Richemont consumers don't care. Why should they?