The Morgan Stanley Report: An Equity Analyst's Take
https://professionalwatches.com/morgan-stanleys-top-20-swiss-watch-company-ranking-for-2024/
This has been reposted many times here but I thought you might be interested in a somewhat differentiated take. I expect this to appeal to maybe 2 of you.
The TLDR is that I used to be an equity analyst and one of my coverage areas was European Luxury. I've invested (and shorted) companies all across the spectrum though none recently.
I had many thoughts on the MS report.
Things of note
The absolute dominance of Rolex. By some counts, Rolex is $10b in revenues (all wholesale) and 30% ish of the Swiss watch industry. The long tale of brands outside the top ten is 49% of the industry. This level of relative and absolute per revenue market share is unprecedented in any period of watch history
The fall of Omega and the rise of Cartier. for as long as I can remember, Omega was the only great challenger to Rolex's dominance over steel sports. It had the heritage, technology, and the marketing prowess...and the wheels came off the bus somehow and Cartier ascended.
The ascendance of high luxury over the traditional affordable and entry level luxury. The rich get richer. Patek and AP are both top 5 brands. Richard.Mille wasn't on the list 6 years ago and is now 6th. Vacheron, the runty child of the holy Trinity, is a billion dollar brand. Compare instead to slow declines of Longines, Tissot, and Tag.
The general underperformance of the LVMH brands......except Hublot. For all the collector love that Zenith gets, it's not even a blip here . The people who buy watches are not the same as the people who talk about watches.
So why does this matter anyway?
I don't do stock picks, not publicly anyway, though I do have some random observations on the publicly traded holding companies.
Richemont (Ticker: CFR SW)
The Richemont watchmakers are a bit of a mixed bag. IWC, Piaget, Panerai, and JLC seem to be in a steady decline though VC seems to be dragged up by its holy Trinity brothers and the drive for ever high price points. The bright spot, of course, is Cartier, a brand so God tier that it can make mechanical watch snobs beg to buy a solar quartz.
Richemont managers should pay attention because the strength of Cartier is absolutely masking underlying weakness in their other watchmakers. A little TLC and focused marketing/product development effort would go a long way to helping the others out.
How confident am I that this is going to happen?
Well, this is the company where the chairman elevated his incredibly accomplished and level headed son to a board seat without the formality of a shareholder vote. So call it 50-50.
LVMH (Ticker: MC FP)
As for LVMH, I am somewhat surprised with how little headway they've made over the years. Perhaps this is simply a fragment of how much the watch industry has accelerated over the years but I do wonder if their suite of brands simply isn't that strong. Hublot is a perennial powerhouse, despite general disdain from watch literati, but Tag is still searching for its killer watch and Zenith is a niche brand at best. The appointment of Frederic Arnault (the youngest son of Bernard Arnault and former CEO of Tag) signifies that they are serious about contending.
LVMH is a titan completely outside of watches, so it may simply just be a matter of them being willing enough to spend to win. Nothing like deep pockets.
Breitling (Private Equity owned, but I am hoping for a silly ticker like BRRR)
Breitling is absolutely killing it saleswise though I gotta wonder when their private equity sponsors are actually going to be able to sell it. The IPO market is dead and I don't think there's a natural buyer among the conglomerates. I think they've also underinvested in movements and wholesaled their existing inhouse movements to buyers who have under cut Breitling in their core (****cough**** Tudor Black Bay Chrono). The acquisition of UG is unlikely to generate revenues for years. There's a lot of IPO style promise here, but given the nature of the market, they're probably not going to get a premium price.
Rolex (Nonprofit, lol)
Rolex is Rolex but you can see the black bay 58 fueled rise of Tudor begin to tail off (introduced in 2018 and beginning to slip in 2023).
I think there's clear evidence that Tudor overstepped its pricing bracket. Witness the evidence.
Sourced from Watch Charts. Interesting no?
I think there was once this notion in some corners of the hobby that Tudor was no longer a classic flanker brand, but instead was able to independently drive its own destiny. The comment was "Omega better watch out" because Tudor had superior demand, superior value prop, superior value retention, the entire thing.
...yeah, I think we can stop arguing about that now. The market has spoken.
I do wonder how this impacts the way that Rolex invests in Tudor going forwards in terms of product development.
https://www.tiktok.com/@misterwatches/video/7279015039703567649
Swatch Group (Ticker: UHR SW)
I have a story. Once upon a time, a job or two ago, I was a young analyst at a soon to be large hedge fund who was trying to diligence Swatch. Being the genial and ambitious sort that I am, after doing my research, I left a message for the CFO trying to set up time to talk about their 2009 results.
And when he (or anyone on his team) failed to call back after a couple days, I left him another message. And then another. Eventually, I got the hint and decided to move onto more pressing work.
Two weeks later, I got a cease and desist letter from the Swatch legal department alleging harassment of their executive team. Additionally, I would not be allowed to dial into their annual conference call that year or any other year.
Silly me, thinking that the CHIEF FINANCIAL OFFICER OF A PUBLICLY TRADED COMPANY should actually talk to potential investors. I mean, the absolute gall of me.
I'm not the only one. Swatch once sued Bloomberg News for publishing a transcript of their annual results call. If there was ever a company that had less interest in the long term welfare of its brands, I don't know what it is.
I have a litany of complaints.
The Moonswatch was a hit and then a bad joke as Nick Hayek repeatedly changed his mind about the distribution model.
Breguet, a watch brand with more history than Patek, VC, or AP, routinely sells below retail pricing because of poor marketing and over supply.
And yet, the greatest crimes committed are against Omega which has the heritage and technology surpassing even Rolex and yet is horrifically mismanaged day after day.
I could write a hundred page thesis on why Omega is terribly mismanaged but let's just take a best hits, shall we?
Where else in the watch world do you see an everyday watch with no moving bezel (the Omega Seamaster Aqua Terra) priced at a retail discount to a 300m diver with a ceramic bezel and the SAME MOVEMENT (Omega Seamaster Diver 300M). $6300 to $5900. It boggles the mind.
Why would you ever buy an Omega in AD, when you can pick up almost any Omega you please from a grey market dealer at a 30% discount?
Why buy an Omega anyway when Swatch seems to give all the points of Omega differentiation to Longines for free anyway? COSC certification, flyer GMTs with Ceramic bezels, long power reserves, all for 70% of the cost.
Where is all the cool tech that Omega has anyway? Spirate technology was heralded as the next great leap in hairspring technology....and I think it made it into a single limited edition Speedmaster. Like, this was supposed to be a massively industrialized improvement and yet it is nowhere to be seen.
It just breaks my heart because so much absolutely awesome stuff comes out everyday from the Swatch group. The PRX, the Zulu Time GMT, the Speedmaster 57, the NTTD Seamaster, and so on and so forth.
And yet, it feels irrelevant. Just sound and fury signifying nothing.
And me banned from Swatch Group conference calls.
Fin
By day, investor and father. By night, Seiko nut. #justgooutsideandtouchgrass
Oh and because you're the nerds in the room. 😉
@SpecKTator @celinesimon @Aurelian @AllTheWatches @Fieldwalker @valleykilmers @Mr.Dee.Bater
😂 Biting my tongue so so hard here. But I'm truly not surprised Swatch Group did that to you.
I've been nerding out on the report over the last two days; IWC had a 13% decline due to miscalculations on pricing. i.e. they're too damn expensive.
I was literally reading this and looking up stock tickers as you tagged me…nerd alert 🚨
This is how I imagine you as a young financial analyst
Then, as you were harassing the CFO of a company l
In between all that, Rolex is the king and we’re all just renting space. We all know what happens to kings, eventually. Unfortunately, the majority public sentiment is still on Hans’ side. In fact, most people don’t know any other watches other than Rolex. That might be the bigger issue here. Can Omega’s fall be correlated to the end of Daniel Craig as Bond and the lack of a clear direction in that franchise?
In the meantime, 30% off retail for an Omega sounds perfect to me.
As they say…
Rado dropping off the list, every Swatch brand dipping, they have a lot to answer for.
When Richemont bought Minerva to give Montblanc an in-house plaything I expected Montblanc to get on to the table and imitate Cartier's success. I am either impatient or just wrong. Richemont has owned Montblanc for 30 years without them taking the turn that I expected. I thought that by now we would have people breathlessly exclaiming that Montblanc was the new Longines. I guess that they are just a pen company who also make watches and handbags.
Oh and if Breitling had a ticker, it would definitely be SQAD
😂 Biting my tongue so so hard here. But I'm truly not surprised Swatch Group did that to you.
I've been nerding out on the report over the last two days; IWC had a 13% decline due to miscalculations on pricing. i.e. they're too damn expensive.
It's a badge of honor now, especially since their stock has only managed to go nowhere over the past twenty years.
I'm sure you have much better stories to tell!
IWC is a fascinating case. I don't think Richemont has done a good job of making their argument that they are worth the premium to other fliegers (even though I think they have a good argument from a finish, capability, and movement perspective).
I was literally reading this and looking up stock tickers as you tagged me…nerd alert 🚨
This is how I imagine you as a young financial analyst
Then, as you were harassing the CFO of a company l
In between all that, Rolex is the king and we’re all just renting space. We all know what happens to kings, eventually. Unfortunately, the majority public sentiment is still on Hans’ side. In fact, most people don’t know any other watches other than Rolex. That might be the bigger issue here. Can Omega’s fall be correlated to the end of Daniel Craig as Bond and the lack of a clear direction in that franchise?
In the meantime, 30% off retail for an Omega sounds perfect to me.
As they say…
Me? I'm a saint. 😈
Omega has lagged for years, regardless of Bond's hair color. It's ill served in the Swatch Conglomerate because it's the only one of he brands there that has the power to stand alone.
As such, Swatch does absolutely insane things like dilute the Speedmaster brand by introducing a cheap plastic toy version of it.
Forget what influencers said about how it was going to increase brand recognition of the Speedy, this is a simple cash grab that will only long term hurt Omega and their positioning. Gucci did it with cheap sunglasses and it took decades for them to recover.
You're right about one thing. It's good for collectors. Those Omegas are getting rather good value wise.
Rado dropping off the list, every Swatch brand dipping, they have a lot to answer for.
When Richemont bought Minerva to give Montblanc an in-house plaything I expected Montblanc to get on to the table and imitate Cartier's success. I am either impatient or just wrong. Richemont has owned Montblanc for 30 years without them taking the turn that I expected. I thought that by now we would have people breathlessly exclaiming that Montblanc was the new Longines. I guess that they are just a pen company who also make watches and handbags.
Your expectations are too high. Mont Blanc has serious horological chops even outside of Minerva and Richemont refuses to invest even relatively modest amounts in their long term success. I have no idea why. Maybe the CEO insulted Rupert's daughter or something because it feels like an opportunity for Montblanc to carve out space from Longines, Tag and Tudor.
Swatch Group is a lost cause. No activist investor can push the Hayeks out....I think eventually they're going to end up in the hands of LVMH just like everyone else buy far past the point where they do have maximized their value.
Oh and if Breitling had a ticker, it would definitely be SQAD
This is such a better ticker. I hope against hope this is true.
Me? I'm a saint. 😈
Omega has lagged for years, regardless of Bond's hair color. It's ill served in the Swatch Conglomerate because it's the only one of he brands there that has the power to stand alone.
As such, Swatch does absolutely insane things like dilute the Speedmaster brand by introducing a cheap plastic toy version of it.
Forget what influencers said about how it was going to increase brand recognition of the Speedy, this is a simple cash grab that will only long term hurt Omega and their positioning. Gucci did it with cheap sunglasses and it took decades for them to recover.
You're right about one thing. It's good for collectors. Those Omegas are getting rather good value wise.
Oh, I didn’t say you were a saint 🤣
I know very little about economics and less about watches. Is there any way for watch brands to innovate and disrupt (I’m twinging just saying those words) the industry. Everyone’s too busy playing Rolex’s game by their rules. How did Apple, Amazon, Netflix etc. and to a lesser extent, Tesla, come to dominate their respective markets? Is it all just great marketing? When you think cellphone, you immediately say iPhone.
Totally agree that the Swatch x stuff does nothing but piss off loyal fans and enthusiasts. They did get everyone talking though which some people would say no publicity is bad publicity. In terms of the Bond connection, I grew up with Brosnan Bond and I only associate Omega with the character. Can you get a similarly charismatic individual to be synonymous with the brand?
This a was a fascinating read. Well done. I need a drink now 😂
Was waiting for this before commenting on others. So many thoughts to share when I get home. Nicely summarized.
Swatch Corp. fascinates me. If I’m reading the financials correctly, I don’t see any significant debt.
Oh, I didn’t say you were a saint 🤣
I know very little about economics and less about watches. Is there any way for watch brands to innovate and disrupt (I’m twinging just saying those words) the industry. Everyone’s too busy playing Rolex’s game by their rules. How did Apple, Amazon, Netflix etc. and to a lesser extent, Tesla, come to dominate their respective markets? Is it all just great marketing? When you think cellphone, you immediately say iPhone.
Totally agree that the Swatch x stuff does nothing but piss off loyal fans and enthusiasts. They did get everyone talking though which some people would say no publicity is bad publicity. In terms of the Bond connection, I grew up with Brosnan Bond and I only associate Omega with the character. Can you get a similarly charismatic individual to be synonymous with the brand?
See that's the thing. The most successful players don't play by Rolex's rules.
Cartier is a great example of a watch brand literally doing something entirely orthogonal to Rolex. Rolex is all about burly sports watches on the wrists of (mostly) men, who do interesting stuff with those watches on.
Cartier is the jeweler to the kings. It sells to people who are just cooler and sexier and richer than you. The most recent cartier watch ad I can remember is just Jake Gyllenhaal looking out a window wearing a Santos.
https://www.youtube.com/watch?v=Z9bYJkm5cZQ
And you know what? That sh*t works!
It is amazing how counter Cartier runs to Rolex in branding.
You want something sporty? Screw you! You get dressy dress watch or slightly less dressy dress watch.
You want mechanical in house movements? Screw you! Buy our quartz fashion watch and like it you nerd. Wait in line for the solar version.
The answer, as always, is just find the branding that is authentic to your brand history.
Omega has those stories, but it gets lost underneath the tidal wave of Moon landings and Bond. They have to tap something into more timeless.
One day I hope to be on the nerd list...
This is not me telling you I was left off, it's me telling myself to get busy learning.
And it really is sad how Omega has been ignored & left to die on the vine.
I don’t think it’ll be the 60% that push things. As is often the case with distributed family controlled companies, internecine family warfare is what makes stuff happen.
How I envision it: one Hayek scion will want to buy a new chateau or super yacht, and his accountant will tells him that no bank will give him a loan because his Swatch Group stock isn’t valuable enough to use as collateral. He’ll say “What about Credit Suisse! They give money to everyone!” The accountant will have to delicately tell his client that Credit Suisse went out of business. The scion will then start an inter family war that results in the dissolution of the voting trust.
If that happens, a non-Hayek CEO will eventually be appointed (with help from that 60%), and if they’re the right person and does what’s eminently possible and revives Swatch Group. Or the wrong person is appointed (or Nick Hayek Jr. causes trouble and makes their life impossible). If the latter happens, Swatch Group will get acquired by a PE firm that will laden it with debt and walks away with all the cash. If the latter happens, it’ll lead to the eventual dissolution of Swatch Group and the great Swiss Watch Crisis of 2038.
Yes, I may have read If You Give A Mouse A Cookie to my daughter last night. Why do you ask? 😁
Ahahaha "WHAT DO YOU MEAN CREDIT SUISSE WENT AWAY????!" - wealthy Swiss person who had been loaned hundreds of millions of Swiss francs at .0000001% interest and was looking for another loan 🤣
As for SWATCH group, they'll probably eliminate or significantly pare down the offerings from the "middle tier" brands, think Mido, probably Rado as well, and let Hamilton and Tissot take up the slack.
Their ultra high end stuff is produced in such small numbers that it's not a massive issue if Blancpain or Breuget or Union Glashutte or Harry Winston aren't selling tens of thousands or even thousands of watches a year.
We're seeing them get Longines to a better place and I have a feeling Omega is going to go through a mini Renaissance in the next 3-5 years.
Also..... I'd bet that Swatch the brand comes out with legitimate smart watches soon enough. Under $1k for sure and possibly under $500, probably a pre-existing smartwatch OS but with the Swatch minimalist aesthetic. It's the perfect Swatch group brand for those IMHO. Semi disposable, but tech forward.
I’m going to disagree a little, because they actively target different markets. Longines loves horses and elegance, whilst also charge a lot less with a wider range. They are more a volume brand… Tudor seem to target everyone who wants a Rolex, or is just deluded, or are happy to settle. They are also massively overpriced at retail, but you and I knew that already.
I don’t think vintage reimagining is exclusively a Tudor thing, nor were they the first. I think all brands are guilty of this, so Longines are effectively the same as everyone else, and arguably do a better job as they turnover more than many other brands? I’m probably being facetious, but I don’t think the board at Longines at each AGM vote for “be like Tudor” as their business plan.
Agreed, Longines also loves airplanes 😎
As for grey market Omegas only being a few hundred or maybe $1,000 more than retail Longines...... Grey market Longines are hundreds of even $1000 less than retail Longines so you're back to the "Normal" price disparity 😃
Exactly right. It's a very fiscally prudent company.
Pays a big dividend, doesn't like debt. 25% of their market cap is in cash which, in isolation, is awesome! These are all good things.
But the problem is, they're in a tank full of great white sharks. Rolex is probably at least twice their size in terms of revenues. Richemont is 3x. LVMH is 12x.
Richemont can buy Swatch with the money it has in its bank accounts today, with some dosh to spare. It would take LVMH less than 6 months to generate the free cash flow to buy Swatch outright if it were not already a controlled company by the Hayeks.
Quantity is a quality all its own they say and when you're in a room full of companies with that much in financial firepower, you have to tread carefully because they can decide to make your life very hard, very easily should they choose.
Last year, Rolex just bought the building that houses Omega's biggest global boutique. Omega doesn't have to move today....but it will eventually. Cost, disruption, etc.
What if LVMH decides to invest $1B (~2% of their market cap or about 23 days of profits for them) over the next five years to develop movements and market Zenith properly as a true Omega killer? Snag the Bond sponsorship, introduce some great value divers with in house movements with snazzy tech? Do they peel of 5% of Omega's customers? 10%? 20%? The financial situation gets ugly fast because the fixed costs of running Omega don't go down that much.
And that's just a pittance to them.
Maybe those Hayek super shares aren't so bad after all. I shudder to think about a Richemont or 🤢🤢 LVHM 🤮 controlled SWATCH group (especially Omega or Longines)
Richemont and LVHM are gigantic luxury goods conglomerates so of course they make insane cash. Leather handbags and luggage from those two have something like 1,000% profit margins and even the highest end Hermes still have multi hundred % profit margins. Pens, same story 🤣
SWATCH is 99% watches and now they basically don't sell mechanical movements outside the group excepting the 7750 and it's siblings (even that is allegedly stopping in a few years). Quartz ETAs are still totally available to anyone.
Running boutiques and paying rent is a massive expense so Rolex buying a massive AD chain is a blow to Omega.... Although it will put those costs on Rolex now....
As for LVHM giving lost of cash to let Zenith shine..... Ehhh I don't think the Frenchmen running LVHM want to give the Swiss any more money than necessary while SWATCH will commit multiple crimes to keep James Bond using Omega FOREVER 😅.
OHH and NASA should be back on the Moon in less than a decade (hopefully 5 years) so Omega will be SURE the Speedmaster and X-33 Speedmaster Skywalker are on that mission. I have a feeling they will NASA certify the Skywalker in the next few years. That'll be a another marketing blitz and PR coup.
You are correct of course, I was over making the point but I think the larger comment on the bizarre way that Omega prices stands. These are two closely related movements and yet they price the ostensibly more capable watch at a discount (and yes the 8900 has a jump hour, not a quick date).
I think it speaks to the general confusion in Omega's catalog where they introduce new movements and capabilities but don't really explain why anyone should care about a lot of this stuff.
It’s funny - I really like Omega. My profile image is one! Were I so inclined to be buying an expensive watch right now, there’re four Omegas that pique my interest (Seamaster Heritage 75th Anniversary, Seamaster Heritage Gold Bronze, Aqua Terra World Timer, Speedmaster 38 Orbis) - more than any other brand. They certainly are pushing technical development in watchmaking, with things like METAS certification and Spirate (and a patented method of using lasers to create miniature rocket models to be used as second hands 😉).
But there’s also something that just seems not quite right with them. My examples:
The inability to get product out consistently and on time. Having a waitlist for several Speedmasters is suboptimal. It doesn’t build buzz, it just leads to frustration if you’re not the market leader. It’s not just the Silver Snoopy. One of my coworkers has been trying to get a meteorite Dark Side of the Moon for months, but no AD in his area has them in stock (yeah, I tell him to buy used, but he won’t). The NTTD Seamaster was hard to come by for a long while (now you can go into an AD and get it, but that took years). The 75th anniversary line didn’t come out all at once, as the Ploprof 75th didn’t get released until September - and no, that wasn’t intentional, according to the frustrated boutique workers that I talked to. The Spirate system was heralded ... and has yet to show up in anything other than one model. Something is not right in Omega’s operations.
They seem to not be on top of trends. More than any other brand, it seems they’re missing the boat on the moderate proportion watch trend. My guess on what happened: Omega didn’t have compactness as a guiding principle for their calibre development the last dozen years because larger watches were de rigueur. Why invest in making a calibre smaller when the case that it’s going to be in is going to be much larger? But now they’re caught out. Luxury watches are fashion accessories first and foremost - not being on top of trends is a cardinal sin in this industry.
The reduction in AD’s, which they’re purportedly doing because they “want to be like Rolex.” But they’re not even doing that right, as it’s resulting in a ton of Omegas being sold for clearance prices. If they wanted to do it right, they’d buy the dropped AD’s stock out and reallocate the inventory to other AD’s so secondary market prices don’t get depressed. You know - how Rolex does it.
I’m hoping Omega gets its house in order, because in the current state, they’ll do just well enough to continue on, but not well enough to really break through and elevate - and not bad enough that they’ll need a wholesale house cleaning.
Maybe those Hayek super shares aren't so bad after all. I shudder to think about a Richemont or 🤢🤢 LVHM 🤮 controlled SWATCH group (especially Omega or Longines)
Richemont and LVHM are gigantic luxury goods conglomerates so of course they make insane cash. Leather handbags and luggage from those two have something like 1,000% profit margins and even the highest end Hermes still have multi hundred % profit margins. Pens, same story 🤣
SWATCH is 99% watches and now they basically don't sell mechanical movements outside the group excepting the 7750 and it's siblings (even that is allegedly stopping in a few years). Quartz ETAs are still totally available to anyone.
Running boutiques and paying rent is a massive expense so Rolex buying a massive AD chain is a blow to Omega.... Although it will put those costs on Rolex now....
As for LVHM giving lost of cash to let Zenith shine..... Ehhh I don't think the Frenchmen running LVHM want to give the Swiss any more money than necessary while SWATCH will commit multiple crimes to keep James Bond using Omega FOREVER 😅.
OHH and NASA should be back on the Moon in less than a decade (hopefully 5 years) so Omega will be SURE the Speedmaster and X-33 Speedmaster Skywalker are on that mission. I have a feeling they will NASA certify the Skywalker in the next few years. That'll be a another marketing blitz and PR coup.
I disagree with most of your points.
I think the appointment of Freddy Arnault to the head of LVMH watches suggests that they are going to put plenty of resources behind it. Will it be Zenith? Who knows but it's going to be something and Omega is the gazelle that's limping along with a gimpy leg. It's where I would attack.
It goes without saying but I deeply hope Omega gets better at being a watch company. Right now, I am not invested in or betting against any of these companies or their competitors (which is why I freely talk about them) so I want a vibrant design eco system as an enthusiast.
But the analyst in me is deeply bearish on Omega's ability to execute on it because they've done a lousy job to date and very evidently are so sensitive to outside critique that it seems unlikely that they will accept even good outside counsel to rectify the real problems.
We will see though! One man's semi informed opinion.
Ahahaha "WHAT DO YOU MEAN CREDIT SUISSE WENT AWAY????!" - wealthy Swiss person who had been loaned hundreds of millions of Swiss francs at .0000001% interest and was looking for another loan 🤣
As for SWATCH group, they'll probably eliminate or significantly pare down the offerings from the "middle tier" brands, think Mido, probably Rado as well, and let Hamilton and Tissot take up the slack.
Their ultra high end stuff is produced in such small numbers that it's not a massive issue if Blancpain or Breuget or Union Glashutte or Harry Winston aren't selling tens of thousands or even thousands of watches a year.
We're seeing them get Longines to a better place and I have a feeling Omega is going to go through a mini Renaissance in the next 3-5 years.
Also..... I'd bet that Swatch the brand comes out with legitimate smart watches soon enough. Under $1k for sure and possibly under $500, probably a pre-existing smartwatch OS but with the Swatch minimalist aesthetic. It's the perfect Swatch group brand for those IMHO. Semi disposable, but tech forward.
I thought a while ago that Mido and Rado (and Certina) should be eliminated, but digging in, those brands have specific regional appeal - Mido is apparently huge in Latin America, and Rado is big in India, for example. I wouldn’t be surprised if they exit certain markets and focus on the regions they’re popular in though.
I’m not sure about that (and isn’t Union Glasshütte a middle market brand?). Blancpain and Breguet should be doing a lot better - if not in terms of volume, but certainly in revenue. Breguet doing only 20K units at an implied retail price of CHF 15K is shockingly bad for a brand that should be up there with the AP’s of the world. Those brands could be contributing far greater margins at their small volumes than they currently do, which would bolster the stock price a ton.
Is Longines in a better place? Sure their product appeals more to us nerds, but I don’t think that’s translating to sales success right now. They’ve fallen from 4th to 8th on the list. Selling 1.6M units is great, but at an average retail price of CHF 1062, it’s clear their volume is in selling the equivalent of mall jewelry counter watches, not the Spirits and Legend Divers and HydroConquests that we like. But I hope you’re right on both accounts!
You mean separate from the Tissot SwALPS OS they use for the T-Touch line? I don’t think Swatch will come out with a Smartwatch based on Android/WearOS; they’ve been very clear that they want everything to remain "Swiss Made.” Making a smartwatch that has an OS not made in Switzerland would be a big turn of face. It’s curious that they released a new Tissot T-Touch last year (the Solar Sport), but only in Switzerland so far. That tells me they don’t think it’s good enough, and only released it as a stopgap measure. Reading reviews of the T-Touch Solar Sport (something I was really intrigued by), it’s clear the watch’s software (and phone app) aren’t ready for mass consumption. I’m hoping they improve SwALPS considerably and allow other brands to use it.
It’s funny - I really like Omega. My profile image is one! Were I so inclined to be buying an expensive watch right now, there’re four Omegas that pique my interest (Seamaster Heritage 75th Anniversary, Seamaster Heritage Gold Bronze, Aqua Terra World Timer, Speedmaster 38 Orbis) - more than any other brand. They certainly are pushing technical development in watchmaking, with things like METAS certification and Spirate (and a patented method of using lasers to create miniature rocket models to be used as second hands 😉).
But there’s also something that just seems not quite right with them. My examples:
The inability to get product out consistently and on time. Having a waitlist for several Speedmasters is suboptimal. It doesn’t build buzz, it just leads to frustration if you’re not the market leader. It’s not just the Silver Snoopy. One of my coworkers has been trying to get a meteorite Dark Side of the Moon for months, but no AD in his area has them in stock (yeah, I tell him to buy used, but he won’t). The NTTD Seamaster was hard to come by for a long while (now you can go into an AD and get it, but that took years). The 75th anniversary line didn’t come out all at once, as the Ploprof 75th didn’t get released until September - and no, that wasn’t intentional, according to the frustrated boutique workers that I talked to. The Spirate system was heralded ... and has yet to show up in anything other than one model. Something is not right in Omega’s operations.
They seem to not be on top of trends. More than any other brand, it seems they’re missing the boat on the moderate proportion watch trend. My guess on what happened: Omega didn’t have compactness as a guiding principle for their calibre development the last dozen years because larger watches were de rigueur. Why invest in making a calibre smaller when the case that it’s going to be in is going to be much larger? But now they’re caught out. Luxury watches are fashion accessories first and foremost - not being on top of trends is a cardinal sin in this industry.
The reduction in AD’s, which they’re purportedly doing because they “want to be like Rolex.” But they’re not even doing that right, as it’s resulting in a ton of Omegas being sold for clearance prices. If they wanted to do it right, they’d buy the dropped AD’s stock out and reallocate the inventory to other AD’s so secondary market prices don’t get depressed. You know - how Rolex does it.
I’m hoping Omega gets its house in order, because in the current state, they’ll do just well enough to continue on, but not well enough to really break through and elevate - and not bad enough that they’ll need a wholesale house cleaning.
Yeah, I am with you. As an enthusiast, I really want Omega to be better. Omega being better is better for the industry. It forces Rolex and Cartier and everyone else to up their game.
But just calling the game like I see it...Omega is limping and it seems like they lack the managerial and operational talent to succeed against better run and more well resourced competitors at this point. Their sensitivity to any sort of criticism suggests that this is not going to improve any time soon.
Apparently, the adage "A rising tide lifts all boats" doesn't apply to the conglomerates like Swatch Group, LVMH, or Richemont. As I look at that chart, some of the more interesting trend lines that piqued my interest:
Swatch Group
Swatch - off the marketing & sales hit of the MoonSwatch, Swatch was the fastest growing watch brand for the 2nd year in a row... but apparently at a cost to some of their other brands like Blancpain, Longines, and Tissot.
Blancpain - apparently the admittedly sorta-cooler-than-MoonSwatch Swatch x Blancpain mashup sank demand well below 50 Fathoms. Below 50 Fathoms... see what I did there?
Longines - its downward trend since 2019 is very interesting to me. Where Longines should have been poised to sustain market share with its impressive heritage and catalog, it's lost share. This one befuddles me a bit as I liked some of their newer models launches.
Tissot - has Tissot corrected its position or will the downward trend or will trend continues next year? Dare I say, too much reliance on the PRX line-up, too many PRX variations and at too-high price points? Seriously, $450 USD for a quartz "Digital" PRX and nearly $2K USD for a gold bezel?!
LVMH
Bulgari - while another famous "fashion" maisons making watches, Cartier, has strengthened its grip on the No. 2 position, Bulgari is slithering down the slope. I wonder if they're embarrassed by Cartier's success or perhaps, they're shifting their attention more toward jewelry?
Tag Heuer - with such sporting heritage, how they've continued to lose pace surprises me. Their model line-up in uninspired at best. The Dark Lord isn't strong enough to enlist more troops into the LVMH empire.
Richemont
Panerai - after 2 years of steadiness, have they once again gone diving? Dare I say, not a lot of excitement from any of their releases. Also, the Radiomir California is handsome AF but over $12k USD for a time-only movement and only with a leather strap?
JLC - Whereas it seems to be fine for AP (the Royal Oak company) and Patek (the Nautilus company) to be known for just one model family, the Reverso hasn't been enough to sustain JLC's position. Dare I say, unlike the also-rectangular Cartier Tank, it appeals to a much smaller niche of buyers. Unless they start innovating in other models and keeping prices steady, I don't see them reversing their fall anytime soon.
Other Notables
Brietling - They're experiencing quite the renaissance. The new designers have really reinvigorated the lineup.
Hermes - dare I saw they are doing something right that apparently Bulgari isn't.
Tudor - losing position is a bit shocking. Will be interesting to see if this develops into a trend. As it is, it's a blip. Dare I say, price hikes might be pushing price points too close to Rolex making it much less of a "value" to near-luxury buyers?
Apparently, the adage "A rising tide lifts all boats" doesn't apply to the conglomerates like Swatch Group, LVMH, or Richemont. As I look at that chart, some of the more interesting trend lines that piqued my interest:
Swatch Group
Swatch - off the marketing & sales hit of the MoonSwatch, Swatch was the fastest growing watch brand for the 2nd year in a row... but apparently at a cost to some of their other brands like Blancpain, Longines, and Tissot.
Blancpain - apparently the admittedly sorta-cooler-than-MoonSwatch Swatch x Blancpain mashup sank demand well below 50 Fathoms. Below 50 Fathoms... see what I did there?
Longines - its downward trend since 2019 is very interesting to me. Where Longines should have been poised to sustain market share with its impressive heritage and catalog, it's lost share. This one befuddles me a bit as I liked some of their newer models launches.
Tissot - has Tissot corrected its position or will the downward trend or will trend continues next year? Dare I say, too much reliance on the PRX line-up, too many PRX variations and at too-high price points? Seriously, $450 USD for a quartz "Digital" PRX and nearly $2K USD for a gold bezel?!
LVMH
Bulgari - while another famous "fashion" maisons making watches, Cartier, has strengthened its grip on the No. 2 position, Bulgari is slithering down the slope. I wonder if they're embarrassed by Cartier's success or perhaps, they're shifting their attention more toward jewelry?
Tag Heuer - with such sporting heritage, how they've continued to lose pace surprises me. Their model line-up in uninspired at best. The Dark Lord isn't strong enough to enlist more troops into the LVMH empire.
Richemont
Panerai - after 2 years of steadiness, have they once again gone diving? Dare I say, not a lot of excitement from any of their releases. Also, the Radiomir California is handsome AF but over $12k USD for a time-only movement and only with a leather strap?
JLC - Whereas it seems to be fine for AP (the Royal Oak company) and Patek (the Nautilus company) to be known for just one model family, the Reverso hasn't been enough to sustain JLC's position. Dare I say, unlike the also-rectangular Cartier Tank, it appeals to a much smaller niche of buyers. Unless they start innovating in other models and keeping prices steady, I don't see them reversing their fall anytime soon.
Other Notables
Brietling - They're experiencing quite the renaissance. The new designers have really reinvigorated the lineup.
Hermes - dare I saw they are doing something right that apparently Bulgari isn't.
Tudor - losing position is a bit shocking. Will be interesting to see if this develops into a trend. As it is, it's a blip. Dare I say, price hikes might be pushing price points too close to Rolex making it much less of a "value" to near-luxury buyers?
I think this is it right here. The Carrera Glassbox is awesome, but the rest of the lineup - outside of the Mario Kart F1 😉 - is really weak. Hopefully the Glassbox portends good things to come.
It’s not that surprising to me. They had a really strong run with the Black Bay line, but they didn’t have too much me last year. I think you’re right about raising prices in a weakening market affecting them, too. I also think they had some production issues, as certain watches were in short supply until the end of last year (e.g., Black Bay 54, Pelagos 39).
Apparently, the adage "A rising tide lifts all boats" doesn't apply to the conglomerates like Swatch Group, LVMH, or Richemont. As I look at that chart, some of the more interesting trend lines that piqued my interest:
Swatch Group
Swatch - off the marketing & sales hit of the MoonSwatch, Swatch was the fastest growing watch brand for the 2nd year in a row... but apparently at a cost to some of their other brands like Blancpain, Longines, and Tissot.
Blancpain - apparently the admittedly sorta-cooler-than-MoonSwatch Swatch x Blancpain mashup sank demand well below 50 Fathoms. Below 50 Fathoms... see what I did there?
Longines - its downward trend since 2019 is very interesting to me. Where Longines should have been poised to sustain market share with its impressive heritage and catalog, it's lost share. This one befuddles me a bit as I liked some of their newer models launches.
Tissot - has Tissot corrected its position or will the downward trend or will trend continues next year? Dare I say, too much reliance on the PRX line-up, too many PRX variations and at too-high price points? Seriously, $450 USD for a quartz "Digital" PRX and nearly $2K USD for a gold bezel?!
LVMH
Bulgari - while another famous "fashion" maisons making watches, Cartier, has strengthened its grip on the No. 2 position, Bulgari is slithering down the slope. I wonder if they're embarrassed by Cartier's success or perhaps, they're shifting their attention more toward jewelry?
Tag Heuer - with such sporting heritage, how they've continued to lose pace surprises me. Their model line-up in uninspired at best. The Dark Lord isn't strong enough to enlist more troops into the LVMH empire.
Richemont
Panerai - after 2 years of steadiness, have they once again gone diving? Dare I say, not a lot of excitement from any of their releases. Also, the Radiomir California is handsome AF but over $12k USD for a time-only movement and only with a leather strap?
JLC - Whereas it seems to be fine for AP (the Royal Oak company) and Patek (the Nautilus company) to be known for just one model family, the Reverso hasn't been enough to sustain JLC's position. Dare I say, unlike the also-rectangular Cartier Tank, it appeals to a much smaller niche of buyers. Unless they start innovating in other models and keeping prices steady, I don't see them reversing their fall anytime soon.
Other Notables
Brietling - They're experiencing quite the renaissance. The new designers have really reinvigorated the lineup.
Hermes - dare I saw they are doing something right that apparently Bulgari isn't.
Tudor - losing position is a bit shocking. Will be interesting to see if this develops into a trend. As it is, it's a blip. Dare I say, price hikes might be pushing price points too close to Rolex making it much less of a "value" to near-luxury buyers?
Love this analysis. I will only add a couple thoughts.
JLC suffers from the fact that it's one watch is a dress watch (when these are somewhat out of fashion). The average revenue per watch is pretty low ($8k at retail) which implies a large percentage of those reversos are probably women's models given how high the JLC catalog goes.
Tudor hiked its prices and is coming off the high of the bb58 killer app. Additionally no small number of people bought a 58 because they actually wanted a Sub and now as supplies loosen, they're probably flipping them now. I'm surprised they didn't lose more share.
In my mind none of this makes sense. Where are all those people with the uber watches when evidently they are selling? For every 10 Omegas there should be an AP and PP somewhere, give or take...
I've seen some Omegas alright but in my entire life I have seen one Royal Oak worn out and about and that was 10y ago. Can't remember seeing a Patek Philippe of any kind on the wrist of someone, ever. Not saying the numbers are bogus, perhaps people who can afford such things don't want anything to do with me 😅, but I still find it noteworthy.
In my mind none of this makes sense. Where are all those people with the uber watches when evidently they are selling? For every 10 Omegas there should be an AP and PP somewhere, give or take...
I've seen some Omegas alright but in my entire life I have seen one Royal Oak worn out and about and that was 10y ago. Can't remember seeing a Patek Philippe of any kind on the wrist of someone, ever. Not saying the numbers are bogus, perhaps people who can afford such things don't want anything to do with me 😅, but I still find it noteworthy.
I find watch spotting very situational. In my normal life, I don't really see a ton of super high end watches. Lots of Omegas, Rolexes, Casios, Seikos, etc. there's a range but it rarely strays into the very highest tier.
If I'm at a hedge fund conference, I probably see more APs and Pateks than Omegas on wrists.
So I can believe the numbers pretty easily because personal experiences aren't a scientific sampling 😂
I find watch spotting very situational. In my normal life, I don't really see a ton of super high end watches. Lots of Omegas, Rolexes, Casios, Seikos, etc. there's a range but it rarely strays into the very highest tier.
If I'm at a hedge fund conference, I probably see more APs and Pateks than Omegas on wrists.
So I can believe the numbers pretty easily because personal experiences aren't a scientific sampling 😂
Haha, yeah they can probably afford it. I interviewed with one of these places that make you sign NDAs before the interview process starts for a quant position once and the salary was wild. Based on that experience, no watch in this world would make me want to work in that industry though 😅
Love this analysis. I will only add a couple thoughts.
JLC suffers from the fact that it's one watch is a dress watch (when these are somewhat out of fashion). The average revenue per watch is pretty low ($8k at retail) which implies a large percentage of those reversos are probably women's models given how high the JLC catalog goes.
Tudor hiked its prices and is coming off the high of the bb58 killer app. Additionally no small number of people bought a 58 because they actually wanted a Sub and now as supplies loosen, they're probably flipping them now. I'm surprised they didn't lose more share.
I'm late to the party, but I just wanted to comment on JLC. As a 20+ year owner of one of their watches, I'm flummoxed as to what has happened to them.
In the early 2000's they were often spoken about (at least on watch forums) as just a step below the Big Three quality-wise. And they were making a strong push into the sports watch realm with the Master Compressors, Polaris models and the various divers. Not all of those watches were to my taste, but at least they seemed to be in the conversation.
(Actually, I just went to their website and saw that they still make a dozen Polaris models. Could have fooled me.)
Today you rarely hear anyone discuss them, except for the occasional Reverso mention. I'm not really sure why. Maybe a combination of marketing misfires, Richemont being stingy with capital, and/or poor distribution.
I'm late to the party, but I just wanted to comment on JLC. As a 20+ year owner of one of their watches, I'm flummoxed as to what has happened to them.
In the early 2000's they were often spoken about (at least on watch forums) as just a step below the Big Three quality-wise. And they were making a strong push into the sports watch realm with the Master Compressors, Polaris models and the various divers. Not all of those watches were to my taste, but at least they seemed to be in the conversation.
(Actually, I just went to their website and saw that they still make a dozen Polaris models. Could have fooled me.)
Today you rarely hear anyone discuss them, except for the occasional Reverso mention. I'm not really sure why. Maybe a combination of marketing misfires, Richemont being stingy with capital, and/or poor distribution.
They still have some gems in the collection (I love the Master Geographic as the best sub $15k world time out there and maybe one of two that's actually useful as a travel watch).
But there's no doubt that it's a sad decline for what is still a great watch brand. They need to take some more creative risks and do stuff that's not just slightly bland dress watches. So much of the collection feels like discount Vacheron to me and thats just a shame for how good they are.