French luxury goods group Kering has announced its plans to sell its watches division, which includes prestigious brands Girard-Perregaux and Ulysse Nardin, to the current management. This strategic decision will allow Kering to concentrate on areas of its business that have greater potential for growth and scalability.
By divesting from the watches division, Kering is following its strategy of prioritizing brands that can become significant assets within the group. The high-end watches industry has faced challenges due to the COVID-19 pandemic, but there are signs of recovery. Luxury group Richemont reported a 32% increase in sales in the third quarter of 2021, indicating a positive outlook for the sector.
Analysts are supportive of Kering’s move, as it enables the company to exit a category where it faced difficulties due to its smaller market position compared to larger competitors. Luca Solca, an analyst with Bernstein, believes that Kering is leveraging the recovering watch market to divest from a segment where it was struggling. Solca also suggests that Kering sees its growth potential lying in other areas, rather than watches.
In recent years, Kering has made efforts to strengthen its watches business by improving distribution channels and revitalizing product lines. However, competition among leading players in the luxury watch industry has intensified, with stronger brands gaining more dominance. Analyst Jean-Philippe Bertschy from Vontobel acknowledges the challenging landscape faced by Kering.
The sale of the watches division is expected to draw attention to Kering’s potential for future mergers and acquisitions (M&A) activity. Speculations about a possible collaboration between Richemont and Kering have been circulating, particularly after LVMH’s acquisition of U.S. jeweler Tiffany, which put pressure on competitors to scale up.
Solca believes that Kering intends to grow both organically and through acquisitions, although it is unlikely to do so in the watches sector. The sale of the watches division may pave the way for strategic moves in other areas of the luxury market.
Overall, Kering’s decision to sell its watches division reflects its commitment to focusing on activities with greater growth potential and scale. It also sheds light on the evolving dynamics and challenges within the high-end watches industry, as well as the possibility of future M&A activity in the luxury sector.
Useful links:
– Reuters – Richemont’s H1 Sales Rise 13%
– CNN – LVMH’s Acquisition of Tiffany
