For the most part, the Great Recession of 2009 pretty much mugged corporate sales and profits. In the watch sector, for example, the Bulgari and Movado groups reported red ink for the year. But there were exceptions to the battered sales and profits syndrome. Fossil, for one, had its most profitable year ever. Here’s a survey of the full-year results of publicly traded firms who are watch industry players.
SWATCH GROUP (Switzerland)
The world’s largest watch company (it has 19 brands ranging from Breguet at the top of the price pyramid, Omega and Longines in the middle and Swatch at the bottom) reported gross sales for the group of 5.42 billion Swiss francs ($4.97 billion) for the year ended December 31. That’s down 8.1% from the record sales of 2009. Sales in the finished watch division (which includes a small amount of jewelry sales) were down 7.7% to SF4.43 billion ($4.06 billion). However, the company noted that it significantly outperformed the Swiss watch industry as a whole, whose sales were down 22.3% for the year. Net income for the group was SF763 million ($700 million), an 8.9% decrease from 2008.
The company said in a statement that 2010 was off to a good start; its January sales were the second best in the group’s history. It said it is “very confident of achieving further organic sales growth and improved margins in 2010.”
LVMH GROUP (France)
The world’s largest luxury products group reported a drop of just 1% in total sales in 2009 to 17.05 billion euros ($24.2 billion). Net profit declined 13% to €2.03 billion ($2.88 billion). However, sales in the group’s watch and jewelry division, which includes the TAG Heuer, Hublot, Zenith, and Dior brands, fell by 13% to €833 million ($1.18 billion). Watch and jewelry division profit dropped by 47% to €63 million ($89.5 million). The company cited “considerable destocking by retailers and the decline of the American and Japanese markets” as factors in the slump. The watch and jewelry division represents less than 5% of the group’s total sales.
BULGARI GROUP (Italy)
Bulgari reported total revenue of €926.6 million ($1.32 billion) for the year ended December 31, a 13.8% drop. It reported a loss of €47.1 million ($66.9 million) for the year. Bulgari’s watch division sales, which includes the Bulgari, Gerald Genta and Daniel Roth brands, fell 24.5% to €212.2 million ($301.3 million). “However, we should note the excellent performance of watches (+20.2%) in directly owned stores in the fourth quarter,” the company said in a statement.
Bulgari announced at the beginning of 2010 that it had reorganized its watch division and that Gerald Genta and Daniel Roth would no longer be separate brands, but would become collections within the Bulgari brand. This process contributed to the watch division losses, the firm said. For example, following the integration of the brands, the company sold Roth and Genta brand product at clearance sales with lower profit margins. For the year, there were extraordinary, non-recurring costs related to the restructuring of €37 million ($52.5 million). “It must be underlined,” the company said, “that two thirds of these non-recurring costs are related to the integration of the Roth and Genta brands.” That amounts to €24.4 million ($34.7 million).
Bulgari Group CEO Francesco Trapani said he was optimistic about 2010. “The first two months showed a high single digit increase in turnover with all channels and product categories performing well…. I believe we can reasonably expect a mid single digit increase in turnover in 2010.”
MOVADO GROUP (USA)
Net sales for the Movado Group fell 17.9% for the fiscal year ended January 31 to $378.4 million. The group reported a loss of $11.9 million. The group designs, sources and distributes the Movado, Ebel, Concord, and ESQ brands as well as several licensed watch brands. “The decline,” the company said in a statement, “is primarily the result of the challenging macroeconomic environment, retailer destocking which occurred throughout the year, and proactive sales management in light of industry liquidation and credit risks.”
The company said that it expects sales to increase 10% to 15% in the next fiscal year (ending January 31, 2011), but that due to a tax expense, it anticipates recording a loss next year.
Gucci, the flagship brand of the luxury good division of the PPR Group, reported revenue of €2.27 billion ($3.22 billion) in fiscal 2009, down 1.2% from 2008. Operating income amounted to €617.7 million ($877.1 million), down 1.1%. Watches accounted for 4.6% of total sales, i.e. €104 million ($147.7 million). That figure is down from the previous year; Gucci did not disclose the percentage. “For the full 12 months, indirect sales to third-party distributors contracted by 8.1%, notably due to the adverse impact on the Timepieces business of the falloff in the Watches (sic) market as a whole.”
Fossil Inc., whose watch brands include Fossil, Relic, Zodiac, Michele, and Michael Kors, reported net sales of $1.55 billion, down 2.2% from the previous year. Net income, however, rose slightly to $139.2 million, a new record for the firm. The company did not break down total sales by product category. It did report that U.S. wholesale sales for watches at $276 million. Fossil also sells watches on international markets and directly to the consumer through its own stores and on its website.
The company said it expects net sales for fiscal 2010 to increase by 9% to 11%.
Hermès reported net sales of €1.91 billion ($2.71 billion), up 3.1% over 2008. Net income remained flat at €288.8 million ($410.1 million). The company stated that its watch sales were down for the year. However, it did not disclose watch sales data. It said it will release complete consolidated data by April 30. In 2008, watches amounted to 5.4% of Hermes’s total sales, about €95 million ($140 million).
The fiscal year for the Richemont Group, and Japanese watch companies Seiko, Citizen and Casio, ended March 31. Full-year results are expected to be released in May.