More Luxury Houses Buying Back High-End Watches to Revive Sales: Hong Kong Dealers
August 05 2016 - 1:54AM
Dow Jones News
By Kathy Chu
HONG KONG--A growing number of luxury watch brands under Cie.
Financiere Richemont SA and LVMH Moet Hennessy Louis Vuitton SE
(MC.FR) are buying back high-end timepieces in Hong Kong in an
effort to revive sales in the world's largest luxury-watch market,
dealers say.
The buybacks--which allow watch dealers to trade in slow-moving
stock for newer items--could result in potentially thousands of
watches being returned to Swiss manufacturers, according to
analysts. The move comes as luxury watchmakers grapple with a
sluggish global economy and changing consumer tastes.
Hong Kong has been especially hard-hit, partly because of the
Chinese government's crackdown on gifting. In June, Swiss watch
exports dropped 16.1% globally, while exports to Hong Kong fell
29%.
LVMH had previously said it was buying back some of its Tag
Heuer watches, and Richemont had said it would take back mainly
Cartier watches.
In addition to those efforts, Hong Kong dealers and others in
the watch industry have told The Wall Street Journal that Richemont
has agreed to buy back timepieces on a case-by-case basis from its
high-end brands including Piaget, Montblanc and IWC
Schaffhausen.
Meanwhile, LVMH is buying back its older Bulgari and Zenith
watches and giving dealers credit to buy new models, also on a
case-by-case basis, according to dealers.
"This kind of buyback offer...hasn't happened in the last 20
years," said Alain Lam, executive director of Oriental Watch
Holdings Ltd. (0398.HK), a luxury watch dealer in Hong Kong that is
participating in the Richemont and LVMH buybacks.
Richemont declined to comment.
Previously, Richemont had said that it was mainly buying back
its Cartier watches in Hong Kong, with Chief Executive Richard
Lepeu calling the move an "exceptional measure" in "exceptional
circumstances."
A person familiar with the buyback said what is unusual is the
large numbers of watches being repurchased.
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."
LVMH, in a July call with analysts, said its buyback of Tag
Heuer watches has been "pretty painful" but will help overall
sales. In the first half of 2016, revenue in LVMH's watch and
jewelry division rose 4%.
Luxury brands want to clean up high levels of inventory in Hong
Kong so dealers can order watches that will sell better, according
to Bruno Lannes, a partner at consultancy Bain & Co.
Write to Kathy Chu at kathy.chu@wsj.com
(END) Dow Jones Newswires
August 05, 2016 01:39 ET (05:39 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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