A French Company Acquires Another Prestigious Italian Jewelry Brand

Tilda Swinton, a spokesperson for Pomellato.

Less than two years after French conglomerate LVMH acquired luxury Italian jewelry brand Bulgari; its French competitor, holding company Kering, finalized its acquisition of Italian jewelry brand Pomellato.

The agreement for Kering to purchase a majority stake in Pomellato was announced in April. On Thursday, Kering, formerly known as PPR, announced in a brief statement that the agreement received clearance from the antitrust authorities and has been finalized.

Pomellato was one of the few truly prestigious independent Italian jewelry brands left to acquire. The brand was founded by Pino Rabolini in Milan in 1967, pioneering the concept of ready-to-wear jewelry. The idea was that jewelry is not just a status symbol but an accessory to be worn and replaced at any time of the day. The current CEO, Andrea Morante, will remain in this position with the company.

Pomellato ranks among the top five European jewelers by sales, with 2012 revenues of €146 million ($190 million). It has a distinct style, an international following and an aura of exclusivity. The brand is known for its colorful rounded cabochon gems and its tactile forms. For example, pavé patterns are created with gemstones of various sizes and irregular forms. In recent years, the company was also known for its advertising partnership with actress Tilda Swinton, who appeared in company photographs and videos.

In 1995, Pomellato launched a second brand, Dodo, an accessible line of 18k gold charms in the shapes of animals. The name, after an extinct bird, was chosen as a way to exemplify the need to protect nature. The brand supports the Italian World Wildlife Fund, working to prevent the extinction of other animal species.

Pomellato’s distribution network includes 86 mono-brand stores (45 Pomellato, 41 Dodo) as well as approximately 600 independent points of sale around the world. More importantly for Pomellato and Kering is that there is plenty of room for growth. Pomellato has expressed an interest to extend its international distribution. Kering, with its immense size as an international player in the apparel and accessories markets, can fuel that growth.

Kering is present in more than 120 countries and generated revenues of €9.7 billion ($12.4 billion) in 2012. With the acquisition Pomellato finalized, the company now has a majority stake in 19 brands that include international luxury fashion brands Gucci, Bottega Veneta and Saint Laurent; French luxury jewelry brand, Boucheron; Chinese luxury jewelry brand, Qeelin; luxury Swiss watch brands, Girard-Perregaux and Jewn-Richard; and sports brand, Puma.

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Stéphane Linder to Become CEO at Tag Heuer

Stéphane Linder

Luxury holding group, LVMH Moët Hennessy Louis Vuitton, has named Stéphane Linder as the new chief executive officer of Swiss luxury brand Tag Heuer. The appointment will take effect June 1.

Linder, who is currently vice president of sales in North America for Tag Heuer, will replace Jean-Christophe Babin who was recently named CEO of Bulgari, also owned by LVMH. Babin replaces Michael Burke who LVMH appointed as head of Louis Vuitton.

Linder began his career with Tag Heuer in 1993 in the R&D Department, and held the positions of Product and Trade Marketing manager, R&D and Brand director, and VP of Marketing and Product Design before taking up his current position in 2010. 

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Baselworld’s ‘Opening Act’

Baselworld representatives at opening day press conference.

BASEL, Switzerland — Baselworld, the premiere event of the Swiss watch industry, on Wednesday unveiled the latest renovation to the multi-building complex that it calls home. The $454.5-million upgrade reflects the spectacular success of an industry that has defied the trials and tribulations of the worldwide economy and a product that has remained popular despite changing fashion and trends. It also is a response to an industry now dominated by a few luxury conglomerates.

The eight-day watch and jewelry fair actually opens Thursday. Wednesday was press day, where top officials discussed the tradeshow and the industry in general. The discussion of the new design was described as Baselworld’s “opening act” by Sylvie Ritter, managing director of the tradeshow.

While several buildings underwent dramatic change under the leadership of architects Herzog & de Meuron, most eyes are focused on Hall 1, now rebranded as the “Global Hall.” It is the main area for some of the most world-renowned watch and jewelry brands. This year, the area not only underwent dramatic structural change, but occupants changed as well. Several brands (mostly independent) were moved to other areas of the complex. Now brands represented by global conglomerates Swatch Group and LVMH far outnumber independent brands. These include Hublot, Tag Heuer, Breguet and Bulgari.

Independent brands that remain in Hall 1 include Patek Philippe, Rolex, and Ulysse Nardin.

René Kamm, CEO of MCH Group, which operates the Basel fairgrounds (Messe Basel), explained that the redesigned hall is reserved for “watch and jewelry brands that have a global impact and a worldwide reach.”

Speakers put on a unified front and spent a great of deal of time thanking exhibitors. However, change this dramatic does not come easy and several exhibitors who have lost their space in Hall 1 were not happy (although refusing to voice their displeasure publicly).

All of this change also came at a price. Several brand executives told me (or refused to dispute) that exhibiting in Hall 1—which includes the construction of multi-story, elaborate temporary showrooms that also have been upgraded this year—now costs upwards of $5 million.

Jacques J. Duchêne, president of the Baselworld Exhibitors’ Committee, said it is the domination of luxury conglomerates that has led to the changes at Baselworld.

“In the course of the past 15 years, the watch and jewelry industry has been through a consolidation process on a scale never witnessed before, and this has also had its effects on the challenges faced by production and marketing, which have changed radically,” Duchêne said. “Now it is a good thing to take note of changes and to adjust to them, but it is even better still to anticipate needs and to be in a position to satisfy them without delay when they arise.”

The price hike and the pressure to create more elaborate booths were also felt among exhibitors who don’t have the deep pockets of the brands in Hall 1. A few companies actually pulled out of the show. Perhaps seeing an opportunity, Hong Kong-based tradeshow and publishing company, UBM Asia, will open its first tradeshow in the European market next year in nearby Freiburg, Germany, with dates that overlap Baselworld.

 

The international press at the opening of Baselworld

But even though some are a bit disgruntled, the 1,460 companies from 40 countries exhibiting recognize the importance of being there in terms of sheer numbers, glamour and international attention. Many brands will bring international celebrities along to help present their new products. More than 3,500 journalists from 70 countries will be covering the event and approximately 100,000 people will attend.

The show is also buoyed by the amazing success of the Swiss watch industry. In 2012, the industry has produced another record year with exports totaling 21.4 billion Swiss francs ($22.6 billion), a 10.9 percent increase over 2011.

“Today, it is thanks to this excellent state of health of the industry that we are able to present the show to you in its attractive new look,” Duchêne said. 

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LVMH Watch and Jewelry Revenue Down 1%

LVMH Moët Hennessy Louis Vuitton, said Monday that first quarter revenue for its Watches and Jewelry division fell 1 percent to 624 million euros ($815.6 million) due to cautious buying by multi-brand retailers. It was the only business division in the luxury goods conglomerate to show a decline in revenue for the period. In organic terms (with comparable structure and constant exchange rates), revenue grew 2 percent.

TAG Heuer’s first quarter was marked by the 50th anniversary of its Carrera line and the new partnership with McLaren which was announced at the Geneva Motor Show. Hublot and Zenith also had a good start to the year. In jewelry, Bulgari “recorded strong revenue growth in its own stores,” largely based on the success of its Serpenti line.

Other brands in the division are Hublot, Zenith, Chaumet, Fred and De Beers Diamond Jewellers.

LVMH said total revenue for the 2013 fiscal year increased 6 percent to 6.94 billion euros ($9.07 billion). Organic revenue growth was 7 percent compared to the same period in 2012, which saw a sharp rise.

The Paris-based conglomerate—whose brands also include Moët Chandon, Louis Vuitton, Dior and Sephora—said it saw “strong growth” in Asia and the United States, while Europe “demonstrates good resistance despite a challenging economic environment.”

First quarter results in its other business division are as follows:

The Wines & Spirits division recorded a revenue rise of 6 percent. Champagne sales were “notably robust” in Asia, which compensated for softer demand in Europe. Hennessy cognac had a “solid performance” in the United States and “rapid growth” in China.

The Fashion & Leather Goods division was nearly flat year-over (0.4%) Louis Vuitton “continued its progress,” the company said. Fendi “benefited from continued developments in fur and leather and pursues” and Céline “made excellent progress” in its own stores.

Perfumes & Cosmetics division experienced a 5 percent increase for the period. Christian Dior recorded “solid growth” due to the “vitality of its perfumes and, in particular, the continued strength of J’adore, Miss Dior and Dior Homme. The new lipstick Dior Addict and the premium skincare Prestige also contributed to the brand’s growth. Guerlain continued to benefit from the strong momentum of La Petite Robe Noire and the success of its high-end skincare Orchidée Impériale,” the company said.

In the Selective Retailing division showed a 16 percent increase for the period. DFS had an “excellent performance driven by the continued growth in Asian tourism.” Sephora gained market share in all its regions as it continues to expand its global store network. Online sales also experienced “rapid growth.”

“In an economic environment which remains uncertain in Europe, LVMH will continue to focus its efforts on developing its brands, will maintain a strict control over costs and will target its investments on the quality, the excellence and the innovation of its products and their distribution,” the company said. 


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Richemont Expects Huge Sales and Profits as Hard Luxuries Continue to Sparkle

Montblanc boutique in Hamburg. Photo credit: Anthony DeMarco

A luxury slowdown in China, a European economy under constant crisis, and sluggish growth in the U.S. has failed to slow the growth in the sale of “hard luxuries” (jewelry and watches). The latest example is Geneva-based Compagnie Financière Richemont, which issued a statement Monday saying that it expects first half profits to rise from 20 percent to 40 percent, year-over-year.

Richemont—whose brands include Cartier, Van Cleef & Arpels, Montblanc and Vacheron Constantin—was required to make this statement prior to its sales and profits reports for the first half of the year. SIX Swiss Exchange requires that issuers make an immediate announcement when “the foreseeable profit or loss for a given period is expected to deviate significantly from the profit or loss achieved in the prior-year period.”

In accordance with these requirements Richemont said that sales for the four months ended in July rose 24 percent on a reported basis and 13 percent on a constant-exchange basis. Based on these results, Richemont’s said its operating profit for the six months ending September 30 is likely to show an increase of between 20 percent and 40 percent compared to the first six months of the last financial year.  Net profit for the same period may also increase by 20 percent and 40 percent.

Richemont sales for the five months ending August 31 will be announced on September 5 first-half results for period ending September 30 will be announced November 9.

This is the latest in financial reports that are revealing the resiliency and strength in hard luxuries.

* In late July, Paris-based LVMH reported revenue growth of 26 percent, year-over-year to $16 billion for the first half of 2012. Group profit rose 28 percent to $2 billion. The luxury group, whose jewelry and watch brands include Tag Heuer, Hublot and Bulgari, acquired in June 2011, reported that total jewelry and watch sales rose 113 percent to $1.6 billion, with Bulgari's revenue now included. Organic growth was 13 percent.

* A few days earlier, Swatch Group, the world’s largest watch company, said its watch and jewelry sales for the first half of 2012 increased 16.7 percent to $3.42 billion, year-over-year. The company owns 19 watch and jewelry brands in all market segments, including Swatch, Breguet and Longines.

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De Beers Diamond Sales Up 27%, Cautious Outlook

The De Beers Group said Friday that total sales increased 26 percent year-over-year to $7.4 billion. Sales of rough diamonds by the Diamond Trading Company, the company’s the rough diamond sales and distribution arm, increased 27 percent for the year to $6.5 billion—the second highest level of sales for the diamond giant. Diamond prices for 2011 rose 29 percent as diamond production fell 5 percent to 31.3 million carats, compared with 2010.

EBITDA for the year increased 21 percent to $1.7 billion with third party debt reduced to $1.3 billion, compared with $1.8 billion in 2010.

De Beers described 2011 as “a year of two halves.” The first “saw exceptional consumer demand growth which, when coupled with lower than historical levels of global diamond production, resulted in very strong polished and rough diamond price growth,” the South African-based company said. “Rough diamond prices in this period included an element of speculative buying in the trading centers.”

However, in the second half of the year demand fell as “both retail and cutting center sentiment was impacted by the challenging macro-economic environment, restricted liquidity (particularly in dollars) in the cutting centers and a slowdown in the rate of growth of consumer demand at retail,” the company said.

De Beers Diamond Jewellers, a diamond jewelry retail venture with LVMH, reported “good growth” in sales across all regions, with greater China particularly strong. “The China opportunity is a priority for De Beers, with further 2012 expansion plans following the opening of stores in Beijing, Tianjin, Dalian and a second Hong Kong store in 2011,” the company said.

De Beers Forevermark diamond brand continued its expansion as it entered India and the U.S. during the second half of the year.  Forevermark is now available in 658 retail doors across nine markets, an increase of 89 percent compared with 2010.

In its outlook, De Beers said that despite economic uncertainty and “barring a global economic shock,” it expects “to see continued growth in global diamond jewelry sales, albeit at lower levels than the exceptional 2011 growth,” driven by luxury goods sales, improving sentiment in the US (the largest diamond jewelry market), continued growth in China, and “the positive impact of the 2011 polished price growth on retail jewelry prices.”

On the production side, the company said it does not expect an increase in diamond carat production in 2012 and that it will “ramp-up profitable carat production as Sightholder demand dictates. In the medium to longer term, the industry fundamentals remain positive with consumer demand, fueled by the emerging markets of China and India, outpacing what will likely be level carat production.”

This should be the last time in the 80-plus-year history of De Beers that it will file an annual report under the ownership of the Oppenheimer family. On November 4, 2011, the family agreed to sell its 40 percent interest of De Beers to its main partner, Anglo American, for $5.1 billion in cash. The transaction is expected to close during the second half of 2012.

On Wednesday, De Beers named Gareth Mostyn as its new CFO and board member.

Bulgari Boosts LVMH Jewelry and Watch Sales

LVMH Moët Hennessy Louis Vuitton, the world’s leading luxury products group, reported that jewelry and watch sales in 2011 grew by 98 percent, year-over-year, due to the acquisition of Bulagri and a 41 percent increase on a comparable structure basis.

“The agreement with the Bulgari family was one of the key moments of the year,” said Bernard Arnault, LVMH chairman and CEO.

Organic growth (which doesn’t include the Bulgari acquisition, the structural changes or currency fluctuations) totaled a more realistic but still extremely strong 23 percent increase for the period. In fact, in terms of percentage, it was still the best performer for the Paris-based luxury conglomerate.

Jewelry and watch sales for the year totaled 1.95 billion euros ($2.56 billion) driven by strong demand across all geographical regions and product lines.

TAG Heuer successfully launched two products entirely developed and manufactured by its own workshop: the Mikrograph 100 and the Mikrotimer Flying 1000, LVMH said. Hublot continued its innovations with the launch of Masterpieces, the new watch collection of Grandes Complications, and extended its store network. Zenith benefited from the renewal of its emblematic lines. Bulgari reported “excellent” results, the company said. Jewelry brands Chaumet, De Beers and Fred, continued to develop their star collections.

The jewelry and watch division was among all categories of products that led to a successful year for LVMH, which owns luxury brands in fashion and leather goods, wine and spirits, perfumes and cosmetics, and Internet retailing. Louis Vuitton, in particular recorded double-digit revenue growth during the year.

LVMH reported a 16 percent increase in total revenue reaching 23.66 billion euros ($31.07 billion) in 2011. Profit from recurring operations increased by 22 percent to 5.26 billion euros ($7 billion), “a performance which is even more remarkable when compared to the strong growth recorded in 2010,” the company said.

In its outlook, the company said it expects an “excellent” 2012.

“After an exceptional 2011, and despite an uncertain economic environment in Europe, LVMH is well-equipped to continue its growth momentum across all business groups in 2012.”