The Swiss Watch Industry Shakeup: A New Era of Deconsolidation?
In a bold move, Richemont has decided to part ways with its long-standing brand, Baume & Mercier, selling it to the Italian powerhouse, Damiani Group. But here's where it gets intriguing: this deal might just be the catalyst for a major shift in the watch industry, sparking a wave of brand sales and reshuffling.
Baume & Mercier, with its rich history spanning nearly two centuries, has been a beloved name in the world of Swiss watches. Known for its approachable pricing and Swiss craftsmanship, the brand has produced iconic timepieces like the Clifton and Riviera collections. However, recent years have seen a struggle for the brand, with sales failing to meet expectations and financial losses mounting, according to industry analysts.
As the Swiss watch industry shifts its focus towards premium, high-end products, Baume & Mercier's value-priced offerings have become a drain on Richemont's resources. The analysts believe that this deal is a strategic move to realign the group's portfolio and focus on its more prestigious maisons like Cartier, Van Cleef & Arpels, and Vacheron Constantin.
In their statement, Richemont expressed their belief that Baume & Mercier's long-term potential lies with the Damiani Group, an Italian luxury conglomerate with a diverse portfolio of jewelry and watch brands. Damiani plans to leverage its multi-brand distribution network to boost Baume & Mercier's visibility and reach, with intentions to open mono-brand boutiques in key locations. Richemont will provide interim operational support for at least a year post-acquisition.
This acquisition, first reported by Business Montres, is expected to set a precedent for more sales of struggling brands within the industry. Oliver Müller, an industry analyst and head of LuxeConsult, believes that Richemont's decision to deconsolidate Baume & Mercier was a necessary step. Morgan Stanley's estimates of the brand's sales at around CHF 69 million in 2024, coupled with Müller's belief that the brand has been losing money for a decade, further emphasize the need for change.
Müller suggests that Richemont might also be considering changes for other brands within its watchmaking division that seem misaligned with the group's prestige maisons. He goes on to advise Swatch Group, owners of brands like Omega and Breguet, to consider similar moves for underperforming brands, as many are in the same price segment as Baume & Mercier, creating internal competition.
The watch industry as a whole is facing challenges, with economic uncertainties, soaring costs, and a shift towards lower production volumes and expensive watches. Vontobel estimates that Baume & Mercier's sales last year were around €44 million, a significant drop from six years ago. Jean-Philippe Bertschy, Head of Swiss Equity Research at Vontobel, praises Richemont's decision, stating that it reinforces the group's commitment to capital discipline and willingness to address underperforming assets.
This move by Richemont echoes a broader trend within the luxury industry, where groups are increasingly scrutinizing their sub-scale or underperforming assets. The question remains: Will other major groups follow suit, and what impact will this have on the future of the Swiss watch industry? What do you think? Share your thoughts in the comments below!
