WEBVTT - WSOG CEO Duffy on Growth and Expansion 0:00:00.080 --> 0:00:03.640 You're listening to Bloomberg Business Week with Carol Masser and 0:00:03.720 --> 0:00:07.920 Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. You might 0:00:07.960 --> 0:00:11.560 recall last year when several luxury watchmakers cut back on production. 0:00:11.680 --> 0:00:15.880 Brands including your Mas, Rolex, UH and other's temporarily halting 0:00:15.880 --> 0:00:18.920 production last year mid the pandemic. It was basically helping 0:00:18.960 --> 0:00:21.760 to ease a supply glut as consumers stop buying amid 0:00:21.760 --> 0:00:24.400 the health crisis. Makes sense. Well, one voice that we've 0:00:24.400 --> 0:00:26.920 turned to for updates on the luxury watch market is 0:00:26.960 --> 0:00:30.240 Brian Duffy, his CEO of Watches of Switzerland Group. The company, 0:00:30.240 --> 0:00:33.120 by the way of reporting earnings earlier today, operating profit 0:00:33.240 --> 0:00:36.400 did meet analyst estimates. Company also laying out a five 0:00:36.479 --> 0:00:39.800 year plan to accelerate strategy, and we're going to talk 0:00:39.840 --> 0:00:41.680 about that and the A d R s of that 0:00:41.720 --> 0:00:43.479 company that trained the U s. They're up more than 0:00:44.280 --> 0:00:47.920 so far. Here in Brian joining us from London. Brian, 0:00:48.000 --> 0:00:51.400 nice to have you back. How are you. I'm very good, 0:00:51.400 --> 0:00:53.680 thank you? And how are you. I'm doing well. Uh, 0:00:53.960 --> 0:00:56.760 feeling like things are getting a little bit back to normal, 0:00:56.760 --> 0:00:59.000 actually a lot back to normal. How does it feel 0:00:59.000 --> 0:01:02.680 for you the same you know those Um, you know, 0:01:02.720 --> 0:01:05.440 big announcements been made in the UK. We've got what 0:01:05.480 --> 0:01:08.440 we're calling Freedom Day coming up in the July nineteenth, 0:01:08.600 --> 0:01:12.759 when all of the you know, employeed restrictions in life 0:01:12.760 --> 0:01:15.720 pretty much are removed. So we are the lights not 0:01:15.840 --> 0:01:18.120 at the end of the tunnel. It's it's pretty close 0:01:18.200 --> 0:01:21.480 and there's a lot of feel good overall in the country, 0:01:21.480 --> 0:01:24.920 so we think the end is near. What's been this 0:01:25.000 --> 0:01:28.560 horrendous period? Yeah, exactly. UM, and I do wonder what 0:01:28.640 --> 0:01:32.360 are you seeing in terms of consumers specifically, and how 0:01:32.400 --> 0:01:34.760 does it compare. I mean, we talked with you in 0:01:34.920 --> 0:01:39.440 last October, which was a tricky time to say the least. Um, 0:01:39.640 --> 0:01:42.320 how how have things improved? What are you seeing in 0:01:42.400 --> 0:01:49.880 terms of trends. We are seeing very strong trends actually, um, 0:01:50.280 --> 0:01:54.120 and uh the UK we you know, we reported as 0:01:54.120 --> 0:01:57.320 you said, they Live reported or our year in the 0:01:57.440 --> 0:01:59.760 UK we were up three point six percent last he 0:01:59.800 --> 0:02:02.560 had despite our stores been closed for twenty six weeks 0:02:02.560 --> 0:02:05.720 of the year, which is kind of amazing. Our stores 0:02:05.800 --> 0:02:09.680 reopened again in April April twelve, and since then business 0:02:09.760 --> 0:02:14.839 has been very very buoyant. Um, there's obviously accumulated disposable 0:02:14.840 --> 0:02:17.800 income and our category. I think it's a very attractive 0:02:17.800 --> 0:02:20.800 option for for people wanting some retail therapy and they 0:02:20.919 --> 0:02:25.959 feel good. The US has been extraordinary in last year 0:02:26.040 --> 0:02:28.639 or your ear sales and dollars. We're up there eight 0:02:28.639 --> 0:02:33.200 and a half percent in the US, despite you know, 0:02:33.320 --> 0:02:36.080 traffic being down, you know your own Manhattan. It's great 0:02:36.080 --> 0:02:37.960 to year, it's getting back to normal, but it's been 0:02:38.000 --> 0:02:40.920 really quiet now for the last you know, fifty and 0:02:40.960 --> 0:02:44.399 eighteen months. Um, But we've done well in New York. 0:02:44.960 --> 0:02:48.520 We've done well in Vegas where again no conventions and 0:02:48.720 --> 0:02:51.519 you know, a bitter little tourism, and our teams have 0:02:51.639 --> 0:02:55.720 just on a tremendous job of reaching out to clients. Um. 0:02:55.760 --> 0:02:59.040 We obviously have products, but the clients wants, so we're 0:02:59.080 --> 0:03:01.919 all to reach out to points and still manage to transact. 0:03:02.600 --> 0:03:06.320 Businesses down in Florida and Georgia were less affected by 0:03:06.520 --> 0:03:12.920 traffic reductions, traffic down, but more like business as usual, 0:03:13.000 --> 0:03:16.200 and they've done well too, so they're clearly very very 0:03:16.240 --> 0:03:19.200 strong consumer demand. In the US, there seems to be 0:03:19.200 --> 0:03:23.000 a real resurgence of a luxury actually expected to continue 0:03:23.120 --> 0:03:26.080 or get you know, improve even more as you know, 0:03:26.200 --> 0:03:32.119 economies continue to open. We we are very relation optimistic. 0:03:32.240 --> 0:03:34.480 We think it will continue. There's obviously a lot of 0:03:35.160 --> 0:03:37.440 you know, money in the system of stimulate, how the 0:03:37.520 --> 0:03:41.640 elves accumulated savings, and they clearly as a feeling in 0:03:41.640 --> 0:03:43.720 everybody's part that they want to feel good again and 0:03:43.840 --> 0:03:46.120 enjoy themselves. So we think it's going to be a 0:03:46.120 --> 0:03:50.000 great holiday season. For example, we were all deprived completely 0:03:50.040 --> 0:03:52.520 of a holiday season last year and you know, time 0:03:52.560 --> 0:03:56.240 with families and having fun and enjoying yourselves. So we 0:03:56.320 --> 0:03:58.040 do think that that we are going to see a 0:03:58.120 --> 0:04:02.360 sustaining period of significant grow was um and that's at 0:04:02.400 --> 0:04:05.640 good experiencing so far in terms of you know, it's 0:04:05.640 --> 0:04:08.120 interesting what you said have you had you know, you 0:04:08.160 --> 0:04:10.320 did well in Vegas. You talked about your teams reaching 0:04:10.320 --> 0:04:13.480 out to clients. Specifically, how much of what you saw 0:04:13.600 --> 0:04:16.919 during the pandemic in terms of sales were existing clients 0:04:16.960 --> 0:04:19.480 people who knew you knew what they were getting. So 0:04:20.160 --> 0:04:24.200 if people were reaching out virtually they were confident, you know, 0:04:24.839 --> 0:04:27.640 a consumer a shopper because they knew you guys and 0:04:27.720 --> 0:04:31.640 knew your brand, versus getting new client telling during the pandemic. 0:04:31.680 --> 0:04:34.839 How tough was that? And it's a it's a very 0:04:34.839 --> 0:04:39.799 good point that we disproportionately, particularly in the US, disproportionately 0:04:39.839 --> 0:04:43.920 sold to existing clients. Um and again when when we 0:04:43.960 --> 0:04:46.880 have clients are on waiting lists for products, and a 0:04:46.920 --> 0:04:49.200 lot of products are on waiting lists, we get the product, 0:04:49.240 --> 0:04:52.120 we call the client. It's so quick to straightforward. But 0:04:52.160 --> 0:04:55.040 the other really encouraging thing as we got a great 0:04:55.080 --> 0:04:57.880 deal of referrals, with a great deal of people calling 0:04:57.920 --> 0:04:59.960 and saying, you know, I've got a body or something 0:05:00.080 --> 0:05:02.159 calling saying I've been referred to you guys, I know 0:05:02.240 --> 0:05:04.400 you can help. So we're delighted to get that sort 0:05:04.440 --> 0:05:07.560 of business too. We also have been very very active. 0:05:07.600 --> 0:05:11.159 We actually increased their spend on marketing, increased their activity 0:05:11.160 --> 0:05:14.840 and marketing, We bought into stock. We generally took a 0:05:14.960 --> 0:05:18.880 very positive approach to the market overall, which has really 0:05:18.920 --> 0:05:21.960 seen as seen us through. So we've been very present 0:05:22.640 --> 0:05:26.360 on on digital, on online and other forms of marketing, 0:05:26.520 --> 0:05:29.400 and so we we have had new clients. We've had 0:05:29.400 --> 0:05:31.479 a lot of people contacting us for the first time. 0:05:31.480 --> 0:05:35.839 But your point is correct. We were selling proportionately more 0:05:35.880 --> 0:05:39.640 to existing clients, which brand of Watches of Switzerland Group. Brian, 0:05:39.720 --> 0:05:41.480 we have about forty seconds and then we're gonna take 0:05:41.480 --> 0:05:43.359 a break and come back and talk some more. The 0:05:43.480 --> 0:05:47.200 digital though approach. How much of what you did reaching 0:05:47.200 --> 0:05:50.160 out to clients digitally do you think stays with us 0:05:50.160 --> 0:05:51.840 on the other side of the pandemic. Is there's now 0:05:51.880 --> 0:05:56.120 a normal way of doing business? I mean, for sure, 0:05:56.320 --> 0:05:59.000 there's a lot that we've learned during this period that 0:05:59.080 --> 0:06:01.000 we It's going to be a part of how we 0:06:01.040 --> 0:06:07.039 approached the market going forward. Luxury concierge, online support, appointment 0:06:07.520 --> 0:06:11.560 making more clients, and just a digital presence our online business. 0:06:11.680 --> 0:06:14.080 All of that's been accelerated and all that will be 0:06:14.120 --> 0:06:16.880 a big part of a of a future. Hey want 0:06:16.880 --> 0:06:18.640 to get it right back to our guests. Brian Duffy's 0:06:18.640 --> 0:06:20.880 still with us, CEO of Watches of Switzerland Group. I 0:06:20.960 --> 0:06:24.400 mentioned they reported earnings earlier today. Company also laying out 0:06:24.400 --> 0:06:27.960 a five year plan to accelerate strategy in the EU. 0:06:28.120 --> 0:06:29.680 I want to get into the details of that, and 0:06:29.680 --> 0:06:32.040 the a d R is really on a tear here 0:06:32.080 --> 0:06:35.640 in the United States up more than so far. Brian 0:06:35.680 --> 0:06:38.240 still with us on the phone from London. So Brian 0:06:38.279 --> 0:06:41.880 tell us about this five year plan, Uh, the strategizing 0:06:41.960 --> 0:06:44.400 that went into it, and what will be the approach. 0:06:46.400 --> 0:06:48.760 You know why we've done the five year plan. Cattle 0:06:48.880 --> 0:06:53.040 is invested. Community were just more and more interested in 0:06:53.279 --> 0:06:55.840 understanding the potential of our growth. You know, we came 0:06:55.920 --> 0:06:58.680 to the US and two thousand eighteen more market leader 0:06:58.760 --> 0:07:01.400 in the UK, I think you know, uh, and there 0:07:01.360 --> 0:07:05.000 our first international step was was into the US two 0:07:05.040 --> 0:07:07.960 thousand seventeen, two thou eighteen. It has really been a 0:07:07.960 --> 0:07:11.280 great success. So proud of what we've done. Um, I 0:07:11.440 --> 0:07:14.200 got a great consumer reaction, great support from our brands, 0:07:14.240 --> 0:07:17.040 and we're ahead of any sort of expectation we had 0:07:17.080 --> 0:07:20.080 of ourselves. In the US, our investments have worked on 0:07:20.200 --> 0:07:22.960 new stores in Manhattan. I'm sure you've seen in huts 0:07:23.000 --> 0:07:27.360 and yards and down so like successes, how we've integrated 0:07:27.360 --> 0:07:30.040 the business and mayor so really really delighted about the 0:07:30.440 --> 0:07:34.520 U s success and so part of all our our 0:07:34.600 --> 0:07:37.520 five year plans are that we will continue to grow 0:07:37.680 --> 0:07:41.160 in the UK. We have some exciting new developments coming 0:07:41.280 --> 0:07:43.720 with great new marketing that we're doing. We're going to 0:07:43.800 --> 0:07:45.800 step up and customer service, so a lot of good 0:07:45.800 --> 0:07:48.120 things that will grow our business in the UK. You 0:07:48.200 --> 0:07:50.800 think we're going to get this proportionate growth in the US, 0:07:50.880 --> 0:07:57.800 we've actually said paranum and we're confident all of it. 0:07:57.800 --> 0:07:59.560 It's got to be done, it's got to be executed. 0:07:59.600 --> 0:08:01.880 But at the interls there to do mixture of new 0:08:01.960 --> 0:08:06.520 projects and investing in our stone network, he calm and 0:08:06.520 --> 0:08:08.840 and acquisition, and we put all that together and we 0:08:08.880 --> 0:08:12.400 think we could do that kind of grow and go ahead. 0:08:12.440 --> 0:08:16.720 Please no, no, no, please finish. So the geography is 0:08:16.800 --> 0:08:20.600 the EU UM and we see similar characteristics in the 0:08:20.640 --> 0:08:23.120 EU as as as as in the US, and that 0:08:23.320 --> 0:08:27.480 is um. The market is pretty fragmented, that a lot 0:08:27.520 --> 0:08:31.760 of small retailers and and today it's really important to 0:08:31.800 --> 0:08:34.880 have scale, to have resources, to be active in digital 0:08:34.920 --> 0:08:39.440 and so on, and and that's helping us grow in 0:08:39.480 --> 0:08:42.640 the US. And we see the same conditions existing in Europe. 0:08:43.080 --> 0:08:46.280 And therefore were we have we've analyzed the European market. 0:08:46.400 --> 0:08:49.280 We spotted where we think our opportunities and so we 0:08:49.360 --> 0:08:53.280 have built into our plan for the first time, our 0:08:53.360 --> 0:08:56.720 plan to enter the EU market. And we think by 0:08:56.760 --> 0:08:59.280 the end of five years, maybe around five to eight 0:08:59.280 --> 0:09:02.600 percent of oursels could could be in the EU. So 0:09:02.800 --> 0:09:04.560 part of your strategy and you asked as you did 0:09:04.600 --> 0:09:06.959 pick up some retailers, right, and is that the same 0:09:07.480 --> 0:09:10.280 kind of strategy that you will deploy when it comes 0:09:10.320 --> 0:09:13.600 to the EU. Yes, I mean definitely, it's the best 0:09:13.640 --> 0:09:17.319 way to enter a market. Here. You get expertise, you 0:09:17.400 --> 0:09:20.800 get clientless, you get great people, get salespeople as we 0:09:20.880 --> 0:09:23.360 did the mayors and win. You know, we acquired the 0:09:23.400 --> 0:09:26.400 right subpetial in the wind results in Las Vegas. So yes, 0:09:26.480 --> 0:09:29.040 it's it's the right way to do it. Um, we 0:09:29.120 --> 0:09:32.160 don't know everything about these markets. We get things to sope. 0:09:32.280 --> 0:09:35.280 If you're buying a business, you're buying that expertise and 0:09:35.320 --> 0:09:38.840 not understanding of the market. Plushure brin One thing that 0:09:38.960 --> 0:09:41.720 I wonder too, though. There's a lot of money out 0:09:41.760 --> 0:09:45.640 there chasing a lot of targets, you know, whether it's 0:09:45.679 --> 0:09:49.080 back money, whether it's private equity money. You know, we 0:09:49.200 --> 0:09:52.600 talked about a pre pandemic. It's a story and narrative 0:09:52.640 --> 0:09:56.319 that's considered. I mean that's continued certainly during the pandemic. 0:09:56.360 --> 0:09:58.679 Are you concerned about having to pay up or are 0:09:58.720 --> 0:10:01.800 you find actually maybe some too stressed assets that will 0:10:01.800 --> 0:10:07.680 make the m and a UH movement maybe not too expensive, 0:10:07.480 --> 0:10:10.319 but we're not We wouldn't be looking at distress, to 0:10:11.080 --> 0:10:14.720 be honest, but we're looking at good businesses, good coin concerns. 0:10:14.800 --> 0:10:18.120 And like I said, there's a lot of smaller businesses 0:10:18.200 --> 0:10:20.720 in the US that tend to be family owned and 0:10:20.840 --> 0:10:23.719 there's a lot of situations whether might not be succession 0:10:23.760 --> 0:10:26.559 and so in great businesses, great people, but they may 0:10:26.600 --> 0:10:29.959 not have the succession. We look by the way to 0:10:30.080 --> 0:10:33.600 retain management and teams wherever we go and make sure 0:10:33.640 --> 0:10:36.520 that what we're doing is additive. We're bringing systems, we're 0:10:36.520 --> 0:10:40.880 bringing marketing, we're bringing digital, we're bringing scale um so. 0:10:41.080 --> 0:10:43.240 But we'll not look at by no means looking at 0:10:43.520 --> 0:10:46.640 distress situations we have. We will look to be fair 0:10:46.720 --> 0:10:50.400 and consider it and the prices that that we're doing. 0:10:50.440 --> 0:10:53.600 And you know, so far, so good, and we've you know, 0:10:53.920 --> 0:10:56.120 quite quite a few discussions to get on the US 0:10:56.200 --> 0:10:59.400 market that at advanced stages. He bro you know, getting 0:10:59.400 --> 0:11:02.920 into you into this segment. I talked about a lot 0:11:02.920 --> 0:11:06.640 of luxury watchmakers cutting back on their production UH last 0:11:06.720 --> 0:11:10.680 year because of oversupply and obviously during the pandemic. I 0:11:10.679 --> 0:11:13.280 think initially, you know, everything, of course just shut down. 0:11:14.640 --> 0:11:17.080 I saw in a statement where you said the luxury 0:11:17.080 --> 0:11:20.400 watch market remains predominantly supply driven, with demand exceeding product 0:11:20.400 --> 0:11:26.000 availability for key brands and models. UM, So supplied demand 0:11:26.040 --> 0:11:28.319 has worked its way out or is there in some 0:11:28.400 --> 0:11:33.080 cases still an oversupply. Honestly, I don't think they really 0:11:33.120 --> 0:11:36.400 ever boys and over supply. UM. I think for many, 0:11:36.440 --> 0:11:38.520 many years, if you look at the market as a whole, 0:11:39.320 --> 0:11:42.559 demands exceeded supply is different by brand, but over all 0:11:42.640 --> 0:11:46.959 demands exceeded supply. UM. And you know our biggest partnership 0:11:47.240 --> 0:11:50.680 for examples both rule X and what we have with 0:11:50.760 --> 0:11:54.120 all exes and increasing NOBE of their products are now 0:11:54.200 --> 0:11:58.920 going on waiting list. Um. And you know almost you know, 0:11:59.000 --> 0:12:02.000 the majority Range I was on waiting list, and Sam 0:12:02.040 --> 0:12:05.880 again with particularly on Marpo, with some of the other 0:12:05.920 --> 0:12:09.560 brands were waiting lists. You know, with Omega the Snoopy watch, 0:12:10.280 --> 0:12:13.440 it celebrated the whole association with the National for example, 0:12:13.520 --> 0:12:18.200 is in waiting list. Brightlings Endurance pro Tudor, which is 0:12:18.240 --> 0:12:21.240 part of the role X Group brand, but every new 0:12:21.280 --> 0:12:26.079 product they brings in waiting list. So honestly, demand significantly 0:12:26.240 --> 0:12:30.040 exceeds supply when you look at the market overall and 0:12:30.280 --> 0:12:33.439 that that differential is growing at the moment while in 0:12:33.520 --> 0:12:37.400 reducing just about twenty seconds ltter seconds. What's been a 0:12:37.440 --> 0:12:43.960 top seller lately? Um, top seller that's been obviously everything 0:12:44.200 --> 0:12:50.880 role X, the Tonas and Maronald's GMT. Huge demand overall, 0:12:51.600 --> 0:12:55.719 protects Nautilus, Odomar, Royal Oak. But you know all the 0:12:55.880 --> 0:12:59.040 other good successes around. Brightling has been a really good 0:12:59.120 --> 0:13:02.320 success with great you put upt Santos from Cape has 0:13:02.360 --> 0:13:05.520 been a big success. So too many to mention it really, 0:13:06.720 --> 0:13:09.680 it's going to say quite quite a variety there. Um, Brian, 0:13:09.720 --> 0:13:12.640 thank you so much, really appreciate checking in with you again. 0:13:13.040 --> 0:13:15.760 Take care of yourself. Brian Duffy, he's CEO of Watches, 0:13:15.760 --> 0:13:18.360 a Switzerland group, joining us on the phone from London.