WEBVTT - Breitling CEO Georges Kern Talks The China Luxury Market

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news.

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<v Speaker 2>Well, let's talk about China's luxury spending slow down. That's

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<v Speaker 2>getting worse. Swiss watchmakers are suffering from a sharp decline

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<v Speaker 2>in demand aid the current pullback brightening CEO Georges Kern

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<v Speaker 2>it's remaining upbeat and is confident that the luxury industry

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<v Speaker 2>has hit bottom. And Georges joins us now to tell

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<v Speaker 2>us more So, Georges, it was just back in September

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<v Speaker 2>you were here on Bloomberg TV telling us that the

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<v Speaker 2>luxury market has hit the bottom. Well, since then, we've

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<v Speaker 2>found things could get a little bit worse. We've had

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<v Speaker 2>Swiss watch exports falling a bit more, LVMH and May

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<v Speaker 2>disclosing a sharp drop and watch sales and there financial results.

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<v Speaker 2>So are we at the bottom now or could there

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<v Speaker 2>be more to come?

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<v Speaker 1>Well, it depends on the countries.

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<v Speaker 3>China remains difficult, but USA has been picking up lately.

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<v Speaker 3>What you see today in the watch market in particular

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<v Speaker 3>is a kind of k development, so meaning a couple

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<v Speaker 3>of brands doing extremely well in a way the winner

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<v Speaker 3>takes it all, and then many brands going sharply down.

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<v Speaker 3>So yes, you have to be part of the first

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<v Speaker 3>group and continue to gain market share, and this is

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<v Speaker 3>the case for Brightling.

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<v Speaker 2>Well, let's take a look at some of those divergent

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<v Speaker 2>markets that you mentioned. The US, as you say, has

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<v Speaker 2>been performing fairly. Well, how do you expect the US

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<v Speaker 2>to consume it to behave after next week, once the

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<v Speaker 2>election's out of the way. And do you think there's

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<v Speaker 2>going to be a difference depending on who wins, whether

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<v Speaker 2>it's a Trump victory or a Harris victory.

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<v Speaker 1>Well, that's very difficult to say.

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<v Speaker 3>We as managers and as corporations, we have to adapt

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<v Speaker 3>to any situation. Of course, Donald Trump certainly has or

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<v Speaker 3>will be given impulses to the economy, but we don't know.

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<v Speaker 3>We don't have a crystal ball in our hands, and

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<v Speaker 3>we have to deal with the situation as it is.

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<v Speaker 1>There are other.

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<v Speaker 3>Countries growing, like India, you know, Malaysia, Indonesia. You cannot

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<v Speaker 3>fight demography, So there are many many countries out there

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<v Speaker 3>where there's growth potential. But bottom line, the US economy

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<v Speaker 3>is extremely resilient. We have been talking about recession in

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<v Speaker 3>the US since years and it never happened. And I

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<v Speaker 3>don't believe that the election will influence this status quo.

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<v Speaker 2>In terms of not fighting demography. Let's talk a little

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<v Speaker 2>bit about China, because of course some of the troubles

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<v Speaker 2>and consumer confidence they are well known. How are you

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<v Speaker 2>approaching that market at the moment.

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<v Speaker 3>Well, we continue our investments. We started really as writing

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<v Speaker 3>only after COVID in a very i would say professional way.

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<v Speaker 3>But China represents for us only six or seven percent

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<v Speaker 3>of our turnover, so thank god, we are not dependent.

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<v Speaker 1>A couple of years.

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<v Speaker 3>Back, I was a little annoyed about the situation today.

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<v Speaker 3>We are part of the branch which are very lucky.

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<v Speaker 3>As you know, many watch manufacturers are dependent, really dependent

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<v Speaker 3>on China, generating forty to fifty percent of their cells.

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<v Speaker 3>So imagine you have a drop of thirty percent of

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<v Speaker 3>forty percent in China. What influences might have on the

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<v Speaker 3>top line of the whole company. So you have to

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<v Speaker 3>be a plane with five engines and even if one

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<v Speaker 3>engine has a problem, at least or four other.

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<v Speaker 1>Engines should work.

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<v Speaker 3>And this is basically our philosophy and strategy and management approach.

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<v Speaker 2>Yeah, some of your competitors, of course, have struggled in

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<v Speaker 2>that regard. We've seen some employees furloughed, do you expect

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<v Speaker 2>to see some more of that going forward.

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<v Speaker 3>I really believe and I hope it's not wishful thinking

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<v Speaker 3>that we have reached the bottom. On a worldwide level,

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<v Speaker 3>we've seen across the board of the last three four

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<v Speaker 3>months an increase of sales. Of course, consumer sentiment is

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<v Speaker 3>influenced by political situations and you've discussed about that, but

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<v Speaker 3>interest rates have been decreased. There are some also economic

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<v Speaker 3>impulses given by the Chinese government, so we see.

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<v Speaker 1>A kind of recovery.

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<v Speaker 3>I hope it will stabilize and we will see growth

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<v Speaker 3>again in the next coming months. On a worldwide level, Again,

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<v Speaker 3>the country I'm the most confident about, certainly the US,

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<v Speaker 3>but also the UK is recovering.

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<v Speaker 1>A little bit.

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<v Speaker 3>And again you have amazing potentials in you what we

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<v Speaker 3>would call new countries and regions. Also India with one

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<v Speaker 3>point six billion population, which is a third economy worldwide,

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<v Speaker 3>and which is also growing.

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<v Speaker 2>In terms of some of the difficulties watchmakers are facing

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<v Speaker 2>right now. Is that something you've had to do though,

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<v Speaker 2>furlough employees or access government support programs or are you managing.

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<v Speaker 3>No, No, we're managing, saying God, And I'm not a

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<v Speaker 3>big fan of subsidies. We cannot only be sunshine managers

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<v Speaker 3>in our business. The economic environment is what it is.

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<v Speaker 3>And as we're in Buffett used to say, when the

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<v Speaker 3>tide goes down, you see who was swimming naked. And

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<v Speaker 3>hopefully many companies have a good basing suit on the world.

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<v Speaker 3>Is stuff out there, But we're fighting and I'm confident,

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<v Speaker 3>and as I said.

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<v Speaker 1>Earlier, we're growing again. So yeah, let's take it from there.

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<v Speaker 2>Just finally, I want to ask you about the Universal

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<v Speaker 2>genev brand that you bought last year. Can you give

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<v Speaker 2>us an update on that? So might we see some

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<v Speaker 2>new watches? How would you position them in the market,

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<v Speaker 2>And in terms of timing, is this really the right

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<v Speaker 2>time to be doing something like this.

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<v Speaker 3>No, absolutely, because interestingly enough, it's the super luxury is

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<v Speaker 3>a luxury. It is a superluxury market which is the

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<v Speaker 3>most resilient. It's the entrance price a point which is suffering.

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<v Speaker 3>So Universalgenere will be positioned above, far above ten thousand

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<v Speaker 3>US dollars and this is something which will add value

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<v Speaker 3>also to brightening bright things. Average price is eight thousand,

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<v Speaker 3>two hundred now, but universalgene will start at thirteen fourteen

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<v Speaker 3>thousand US dollars, so I think it's a very good

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<v Speaker 3>compliment to what we offer today with writing. It's a

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<v Speaker 3>totally different brand. It will be managed in a different way.

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<v Speaker 3>The retailers are waiting for it. We just launched yesterday

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<v Speaker 3>all our social media and I invite everybody to have

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<v Speaker 3>a look into this fantastic brand which will be relaunched

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<v Speaker 3>by twenty twenty six.

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<v Speaker 2>All Right, Georges Kern, the CEO of Bridling, thank you

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<v Speaker 2>so much for joining us.