Speaker 1: You're listening to Bloomberg Business Week with Carol Masser and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. You might
Speaker 1: recall last year when several luxury watchmakers cut back on production.
Speaker 1: Brands including your Mas, Rolex, UH and other's temporarily halting
Speaker 1: production last year mid the pandemic. It was basically helping
Speaker 1: to ease a supply glut as consumers stop buying amid
Speaker 1: the health crisis. Makes sense. Well, one voice that we've
Speaker 1: turned to for updates on the luxury watch market is
Speaker 1: Brian Duffy, his CEO of Watches of Switzerland Group. The company,
Speaker 1: by the way of reporting earnings earlier today, operating profit
Speaker 1: did meet analyst estimates. Company also laying out a five
Speaker 1: year plan to accelerate strategy, and we're going to talk
Speaker 1: about that and the A d R s of that
Speaker 1: company that trained the U s. They're up more than
Speaker 1: so far. Here in Brian joining us from London. Brian,
Speaker 1: nice to have you back. How are you. I'm very good,
Speaker 1: thank you? And how are you. I'm doing well. Uh,
Speaker 1: feeling like things are getting a little bit back to normal,
Speaker 1: actually a lot back to normal. How does it feel
Speaker 1: for you the same you know those Um, you know,
Speaker 1: big announcements been made in the UK. We've got what
Speaker 1: we're calling Freedom Day coming up in the July nineteenth,
Speaker 1: when all of the you know, employeed restrictions in life
Speaker 1: pretty much are removed. So we are the lights not
Speaker 1: at the end of the tunnel. It's it's pretty close
Speaker 1: and there's a lot of feel good overall in the country,
Speaker 1: so we think the end is near. What's been this
Speaker 1: horrendous period? Yeah, exactly. UM, and I do wonder what
Speaker 1: are you seeing in terms of consumers specifically, and how
Speaker 1: does it compare. I mean, we talked with you in
Speaker 1: last October, which was a tricky time to say the least. Um,
Speaker 1: how how have things improved? What are you seeing in
Speaker 1: terms of trends. We are seeing very strong trends actually, um,
Speaker 1: and uh the UK we you know, we reported as
Speaker 1: you said, they Live reported or our year in the
Speaker 1: UK we were up three point six percent last he
Speaker 1: had despite our stores been closed for twenty six weeks
Speaker 1: of the year, which is kind of amazing. Our stores
Speaker 1: reopened again in April April twelve, and since then business
Speaker 1: has been very very buoyant. Um, there's obviously accumulated disposable
Speaker 1: income and our category. I think it's a very attractive
Speaker 1: option for for people wanting some retail therapy and they
Speaker 1: feel good. The US has been extraordinary in last year
Speaker 1: or your ear sales and dollars. We're up there eight
Speaker 1: and a half percent in the US, despite you know,
Speaker 1: traffic being down, you know your own Manhattan. It's great
Speaker 1: to year, it's getting back to normal, but it's been
Speaker 1: really quiet now for the last you know, fifty and
Speaker 1: eighteen months. Um, But we've done well in New York.
Speaker 1: We've done well in Vegas where again no conventions and
Speaker 1: you know, a bitter little tourism, and our teams have
Speaker 1: just on a tremendous job of reaching out to clients. Um.
Speaker 1: We obviously have products, but the clients wants, so we're
Speaker 1: all to reach out to points and still manage to transact.
Speaker 1: Businesses down in Florida and Georgia were less affected by
Speaker 1: traffic reductions, traffic down, but more like business as usual,
Speaker 1: and they've done well too, so they're clearly very very
Speaker 1: strong consumer demand. In the US, there seems to be
Speaker 1: a real resurgence of a luxury actually expected to continue
Speaker 1: or get you know, improve even more as you know,
Speaker 1: economies continue to open. We we are very relation optimistic.
Speaker 1: We think it will continue. There's obviously a lot of
Speaker 1: you know, money in the system of stimulate, how the
Speaker 1: elves accumulated savings, and they clearly as a feeling in
Speaker 1: everybody's part that they want to feel good again and
Speaker 1: enjoy themselves. So we think it's going to be a
Speaker 1: great holiday season. For example, we were all deprived completely
Speaker 1: of a holiday season last year and you know, time
Speaker 1: with families and having fun and enjoying yourselves. So we
Speaker 1: do think that that we are going to see a
Speaker 1: sustaining period of significant grow was um and that's at
Speaker 1: good experiencing so far in terms of you know, it's
Speaker 1: interesting what you said have you had you know, you
Speaker 1: did well in Vegas. You talked about your teams reaching
Speaker 1: out to clients. Specifically, how much of what you saw
Speaker 1: during the pandemic in terms of sales were existing clients
Speaker 1: people who knew you knew what they were getting. So
Speaker 1: if people were reaching out virtually they were confident, you know,
Speaker 1: a consumer a shopper because they knew you guys and
Speaker 1: knew your brand, versus getting new client telling during the pandemic.
Speaker 1: How tough was that? And it's a it's a very
Speaker 1: good point that we disproportionately, particularly in the US, disproportionately
Speaker 1: sold to existing clients. Um and again when when we
Speaker 1: have clients are on waiting lists for products, and a
Speaker 1: lot of products are on waiting lists, we get the product,
Speaker 1: we call the client. It's so quick to straightforward. But
Speaker 1: the other really encouraging thing as we got a great
Speaker 1: deal of referrals, with a great deal of people calling
Speaker 1: and saying, you know, I've got a body or something
Speaker 1: calling saying I've been referred to you guys, I know
Speaker 1: you can help. So we're delighted to get that sort
Speaker 1: of business too. We also have been very very active.
Speaker 1: We actually increased their spend on marketing, increased their activity
Speaker 1: and marketing, We bought into stock. We generally took a
Speaker 1: very positive approach to the market overall, which has really
Speaker 1: seen as seen us through. So we've been very present
Speaker 1: on on digital, on online and other forms of marketing,
Speaker 1: and so we we have had new clients. We've had
Speaker 1: a lot of people contacting us for the first time.
Speaker 1: But your point is correct. We were selling proportionately more
Speaker 1: to existing clients, which brand of Watches of Switzerland Group. Brian,
Speaker 1: we have about forty seconds and then we're gonna take
Speaker 1: a break and come back and talk some more. The
Speaker 1: digital though approach. How much of what you did reaching
Speaker 1: out to clients digitally do you think stays with us
Speaker 1: on the other side of the pandemic. Is there's now
Speaker 1: a normal way of doing business? I mean, for sure,
Speaker 1: there's a lot that we've learned during this period that
Speaker 1: we It's going to be a part of how we
Speaker 1: approached the market going forward. Luxury concierge, online support, appointment
Speaker 1: making more clients, and just a digital presence our online business.
Speaker 1: All of that's been accelerated and all that will be
Speaker 1: a big part of a of a future. Hey want
Speaker 1: to get it right back to our guests. Brian Duffy's
Speaker 1: still with us, CEO of Watches of Switzerland Group. I
Speaker 1: mentioned they reported earnings earlier today. Company also laying out
Speaker 1: a five year plan to accelerate strategy in the EU.
Speaker 1: I want to get into the details of that, and
Speaker 1: the a d R is really on a tear here
Speaker 1: in the United States up more than so far. Brian
Speaker 1: still with us on the phone from London. So Brian
Speaker 1: tell us about this five year plan, Uh, the strategizing
Speaker 1: that went into it, and what will be the approach.
Speaker 1: You know why we've done the five year plan. Cattle
Speaker 1: is invested. Community were just more and more interested in
Speaker 1: understanding the potential of our growth. You know, we came
Speaker 1: to the US and two thousand eighteen more market leader
Speaker 1: in the UK, I think you know, uh, and there
Speaker 1: our first international step was was into the US two
Speaker 1: thousand seventeen, two thou eighteen. It has really been a
Speaker 1: great success. So proud of what we've done. Um, I
Speaker 1: got a great consumer reaction, great support from our brands,
Speaker 1: and we're ahead of any sort of expectation we had
Speaker 1: of ourselves. In the US, our investments have worked on
Speaker 1: new stores in Manhattan. I'm sure you've seen in huts
Speaker 1: and yards and down so like successes, how we've integrated
Speaker 1: the business and mayor so really really delighted about the
Speaker 1: U s success and so part of all our our
Speaker 1: five year plans are that we will continue to grow
Speaker 1: in the UK. We have some exciting new developments coming
Speaker 1: with great new marketing that we're doing. We're going to
Speaker 1: step up and customer service, so a lot of good
Speaker 1: things that will grow our business in the UK. You
Speaker 1: think we're going to get this proportionate growth in the US,
Speaker 1: we've actually said paranum and we're confident all of it.
Speaker 1: It's got to be done, it's got to be executed.
Speaker 1: But at the interls there to do mixture of new
Speaker 1: projects and investing in our stone network, he calm and
Speaker 1: and acquisition, and we put all that together and we
Speaker 1: think we could do that kind of grow and go ahead.
Speaker 1: Please no, no, no, please finish. So the geography is
Speaker 1: the EU UM and we see similar characteristics in the
Speaker 1: EU as as as as in the US, and that
Speaker 1: is um. The market is pretty fragmented, that a lot
Speaker 1: of small retailers and and today it's really important to
Speaker 1: have scale, to have resources, to be active in digital
Speaker 1: and so on, and and that's helping us grow in
Speaker 1: the US. And we see the same conditions existing in Europe.
Speaker 1: And therefore were we have we've analyzed the European market.
Speaker 1: We spotted where we think our opportunities and so we
Speaker 1: have built into our plan for the first time, our
Speaker 1: plan to enter the EU market. And we think by
Speaker 1: the end of five years, maybe around five to eight
Speaker 1: percent of oursels could could be in the EU. So
Speaker 1: part of your strategy and you asked as you did
Speaker 1: pick up some retailers, right, and is that the same
Speaker 1: kind of strategy that you will deploy when it comes
Speaker 1: to the EU. Yes, I mean definitely, it's the best
Speaker 1: way to enter a market. Here. You get expertise, you
Speaker 1: get clientless, you get great people, get salespeople as we
Speaker 1: did the mayors and win. You know, we acquired the
Speaker 1: right subpetial in the wind results in Las Vegas. So yes,
Speaker 1: it's it's the right way to do it. Um, we
Speaker 1: don't know everything about these markets. We get things to sope.
Speaker 1: If you're buying a business, you're buying that expertise and
Speaker 1: not understanding of the market. Plushure brin One thing that
Speaker 1: I wonder too, though. There's a lot of money out
Speaker 1: there chasing a lot of targets, you know, whether it's
Speaker 1: back money, whether it's private equity money. You know, we
Speaker 1: talked about a pre pandemic. It's a story and narrative
Speaker 1: that's considered. I mean that's continued certainly during the pandemic.
Speaker 1: Are you concerned about having to pay up or are
Speaker 1: you find actually maybe some too stressed assets that will
Speaker 1: make the m and a UH movement maybe not too expensive,
Speaker 1: but we're not We wouldn't be looking at distress, to
Speaker 1: be honest, but we're looking at good businesses, good coin concerns.
Speaker 1: And like I said, there's a lot of smaller businesses
Speaker 1: in the US that tend to be family owned and
Speaker 1: there's a lot of situations whether might not be succession
Speaker 1: and so in great businesses, great people, but they may
Speaker 1: not have the succession. We look by the way to
Speaker 1: retain management and teams wherever we go and make sure
Speaker 1: that what we're doing is additive. We're bringing systems, we're
Speaker 1: bringing marketing, we're bringing digital, we're bringing scale um so.
Speaker 1: But we'll not look at by no means looking at
Speaker 1: distress situations we have. We will look to be fair
Speaker 1: and consider it and the prices that that we're doing.
Speaker 1: And you know, so far, so good, and we've you know,
Speaker 1: quite quite a few discussions to get on the US
Speaker 1: market that at advanced stages. He bro you know, getting
Speaker 1: into you into this segment. I talked about a lot
Speaker 1: of luxury watchmakers cutting back on their production UH last
Speaker 1: year because of oversupply and obviously during the pandemic. I
Speaker 1: think initially, you know, everything, of course just shut down.
Speaker 1: I saw in a statement where you said the luxury
Speaker 1: watch market remains predominantly supply driven, with demand exceeding product
Speaker 1: availability for key brands and models. UM, So supplied demand
Speaker 1: has worked its way out or is there in some
Speaker 1: cases still an oversupply. Honestly, I don't think they really
Speaker 1: ever boys and over supply. UM. I think for many,
Speaker 1: many years, if you look at the market as a whole,
Speaker 1: demands exceeded supply is different by brand, but over all
Speaker 1: demands exceeded supply. UM. And you know our biggest partnership
Speaker 1: for examples both rule X and what we have with
Speaker 1: all exes and increasing NOBE of their products are now
Speaker 1: going on waiting list. Um. And you know almost you know,
Speaker 1: the majority Range I was on waiting list, and Sam
Speaker 1: again with particularly on Marpo, with some of the other
Speaker 1: brands were waiting lists. You know, with Omega the Snoopy watch,
Speaker 1: it celebrated the whole association with the National for example,
Speaker 1: is in waiting list. Brightlings Endurance pro Tudor, which is
Speaker 1: part of the role X Group brand, but every new
Speaker 1: product they brings in waiting list. So honestly, demand significantly
Speaker 1: exceeds supply when you look at the market overall and
Speaker 1: that that differential is growing at the moment while in
Speaker 1: reducing just about twenty seconds ltter seconds. What's been a
Speaker 1: top seller lately? Um, top seller that's been obviously everything
Speaker 1: role X, the Tonas and Maronald's GMT. Huge demand overall,
Speaker 1: protects Nautilus, Odomar, Royal Oak. But you know all the
Speaker 1: other good successes around. Brightling has been a really good
Speaker 1: success with great you put upt Santos from Cape has
Speaker 1: been a big success. So too many to mention it really,
Speaker 1: it's going to say quite quite a variety there. Um, Brian,
Speaker 1: thank you so much, really appreciate checking in with you again.
Speaker 1: Take care of yourself. Brian Duffy, he's CEO of Watches,
Speaker 1: a Switzerland group, joining us on the phone from London.