LVMH posts 2016 1H earnings results

[calibre11user]

LVMH today released its 2016 1H earnings report. Its watches and jewelry division had a year-over-year revenue increase of 4%, but profit was flat with no change. Bulgari seemed to be the star of the group, followed by TAG Heuer.

The full PDF report repeatedly mentions TAG Heuer's focus on its core ranges and the Connected. In particular, on page 13 of that report:

The solid revenue growth reported by TAG Heuer despite challenges faced in the watch market worldwide demonstrated the relevance of the brand’s strategy of refocusing on its core product ranges. TAG Heuer’s strong momentum was reflected in the newest additions to the brand’s iconic Formula 1, Carrera and Aquaracer collections. The Carrera Heuer 02 and Formula 1 Chronograph models were particularly well received in Basel. The TAG Heuer Connected smartwatch, a major innovation unveiled at the end of 2015, met with continued success. TAG Heuer continued to enhance its retail network, with store openings in Tianjin, Macao and New Delhi. The brand’s visibility among its target customers was reinforced thanks to a number of new partnerships, including those with the Coachella Valley Music and Arts Festival, the Paris and London marathons, the English Premier League, and the Chinese Football Association Super League.

 

[Calibre11]

Bulgari are putting out some really nice watches- probably not surprising given that there are several of the old TAG Heuer team across there now. I get the feeling that- once again- Biver and the team called it right to focus on manufacturing efficiency to allow TAG Heuer to make more money at lower price-points. We are now seeing a big push from many brands to a lower price point- but TAG Heuer moved first.

A good example of this is the new Piaget Polo S. Normally, Piaget only make watches in precious metal- gold, platinum, etc...NO steel. That means that a reasonably basic Altiplano is around the US$20k mark. But the Polo S does come in steel and is priced below $10k, I assume because the market for $20k watches is shrinking

dc

 

[calibre11user]

Apparently there are more problems, at least in Hong Kong. A recent Wall Street Journal article discusses the unsold inventory that LVMH, among many other companies, is accumulating.

http://www.wsj.com/articles/hard-times-for-luxury-watch-dealers-1470375753


Richemont declined to comment. Mr. Lam says that LVMH is also buying back older models of its Tag Heuer, Bulgari and Zenith watches from Oriental, and giving dealers credit to use for new models.

A LVMH spokeswoman said the luxury house isn't doing anything “outside of the brand’s normal commercial practices to create room for new items in the assortment.”

In a recent call with analysts, LVMH chief financial officer Jean-Jacques Guiony acknowledged that the buyback of Tag Heuer watches has been “pretty painful.” But bringing down the price point will help sales, he said. LVMH posted a 4% sales increase for its watch and jewelry unit in the first six months of this year.

 

[Calibre11]

Thanks for that update @calibre11user I'm due to interview JC Biver in the next few weeks, so will try and get his take on what's going on. From what I can see, the brands most vulnerable are those in the middle- i.e. above TAG Heuer and below AP/ Patek, etc...call it the $7000-13000 bracket.

Zenith looks vulnerable to me- all watch lovers love Zenith, but only a small percent of us actually go ahead and buy (a new) one.

 

[Hubert]

Calibre11

Thanks for that update @calibre11user I'm due to interview JC Biver in the next few weeks, so will try and get his take on what's going on. From what I can see, the brands most vulnerable are those in the middle- i.e. above TAG Heuer and below AP/ Patek, etc...call it the $7000-13000 bracket.

Zenith looks vulnerable to me- all watch lovers love Zenith, but only a small percent of us actually go ahead and buy (a new) one.

It will be very interesting to read JCB's comments on this. I fall in the category of those would love to add a Zenith to my collection, but there are so many other great options out there, that they keep getting bumped.